Borrowers took out 171,800 new buy-to-let mortgages, worth £21.2 billion, in the first half of 2007, according to the CML. By the end of June, the number of buy-to-let loans outstanding had reached a record 938,500. The value of outstanding loans totalled £108 billion - also a record and an increase of 14 per cent on the second half of 2006. Buy-to-let lending now accounts for 10 per cent of mortgage balances, compared to just 3 per cent five years ago.
The number of loans taken out in the first half of this year was 3 per cent lower than in the second half of 2006. But over the same period there was a modest 2 per cent growth in the value of new buy-to-let lending, driven mainly by higher property values.
Although the rate of growth of the buy-to-let sector slowed in the first half of this year, it was stronger than in the wider mortgage market, in which the value of lending declined by 4 per cent. As a result, buy-to-let lending accounted for 12 per cent of all advances in the first half of this year, the highest proportion seen to date.
A strong rental market, in which landlords are reporting rising rents and shorter void periods, helped ensure that buy-to-let arrears remained lower than in the wider mortgage market. The number of buy-to-let mortgages in arrears of more than three months rose modestly to 0.63 per cent from 0.58 per cent in the second half of 2006. But the figure remains significantly lower than in the wider mortgage market (1.06 per cent). Possessions of buy-to-let properties also nudged upwards to 0.08 per cent, from 0.06 per cent in the second half of 2006. Again, however, possessions were lower than in the mainstream mortgage market (0.12 per cent).
The typical maximum aggregate loan that lenders were prepared to make to a single investor increased to £2.5 million, reflecting rising property prices and the continuing confidence of lenders in the sector.
Commenting on the data, Nigel Terrington, chief executive of Paragon, commented: "CML data shows a buy-to-let market that is extremely resilient and continues to out-perform the mortgage market on all measures.
"In terms of business volumes, the number of new buy-to-let loans remained strong in Q1 and Q2 2007, although volumes were lower than in Q3 2006. Credit quality of buy-to-let continues to be exceptionally high, and arrears levels remain much lower than the mortgage market overall - 0.63 per cent of buy-to-let loans were three or more months in arrears in H1, compared with 1.06 per cent for all loans. Equally, possessions are very low, and in fact declined between Q1 and Q2. Not only does this continue to show buy-to-let as delivering a better performance than mainstream mortgages but shows that there is absolutely no comparability with non-conforming lending.
"All in all, buy-to-let continues to represent an important and low risk segment of the mortgage market, accounting for around 12 per cent of new mortgage advances by value. The private rented sector has played, and continues to play, an important role in helping to ease the chronic shortage of affordable homes in this country, by providing accommodation for many types of household. With demand for homes set to continue to grow on the back of inward migration, population growth and other demographic factors, the prospects for buy-to-let look as positive as ever."
