BTL Investment Continues To Improve
There was an increase in investment into the buy to let market in the third quarter of this year thanks to a strong demand for rental property.
A total of £2.8 billion was advanced to landlords in the three months to the end of September, 33 percent more than during the same period of 2009 and the highest level since the final quarter of 2008, according to the Council of Mortgage Lenders (CML).
The buy to let market was hit hard by the credit crunch, with many lenders withdrawing from the sector completely as they struggled to raise funds to offer.
Loan levels hit a low of £1.9 billion in the second quarter of 2009, but advances have been gradually rising since then as the market has recovered.
Despite the recent improvement, lending levels remain only a fraction of the record £12.4 billion advanced to buy to let investors during the third quarters of both 2006 and 2007.
The CML said the rise in lending during the third quarter, which was 12 percent up on the previous three months, was driven by ongoing strong demand for rental property as many first-time buyers struggled to get the mortgages they needed to buy their own home.
Michael Coogan, Director General of the CML, said: “We would expect buy to let demand to pick up further if current rising rental trends continue and house prices remain broadly stable”.
“However, there is short-term uncertainty as a result of the unresolved debate on housing benefit and landlords’ response to new limits”.
“The bigger question is whether there will be sufficient supply side capacity to meet that demand, as the number of buy to let lenders dwindled in the credit crunch after 2007 and is yet to be fully restored.”
There are currently 309 different buy to let mortgages available, well up on the 185 products on offer when the market reached its low in September last year, but still only a tenth of the 3,648 available in July 2007 before the credit crunch first struck, according to financial information group Moneyfacts.co.uk.
Nigel Terrington, Chief Executive of buy to let lender Paragon, said: “The 12 percent rise in gross advances is encouraging and reflects an increased level of confidence amongst landlords and lenders in the buy to let market”.
“Tenant demand is extremely strong and the private rented sector needs to expand to cope with the increased numbers of people wanting to live in rented homes”.
