A report by the Council of Mortgage Lenders (CML) has proved the continued success of the buy-to-let (BTL) market, revealing that the sector accounted for £38.4 billion mortgages taken out in 2006. BTL lending accounted for 11 per cent of all new lending in 2006, increasing by almost 50 per cent in terms of volume, and a 57 per cent increase in value from the 2005 findings. The figures also showed that the total number of outstanding BTL mortgages stood at 850,000, worth close to £100 billion. Since the 2005 findings, the CML indicated that the market had grown by over £20 billion, with a 21 per cent rise in the number of mortgages. Looking at the final six months of 2006, the CML revealed that 178,000 took place, accounting for £21 billion of business. This represented the highest figures since 1998, when the study started.
No surprises
Buoyed by rising house prices, a continued pensions crisis, rising immigration numbers and the increasing desire by individuals to rent, in order to have flexible living arrangements, it is no surprise that the sector has grown.
Nigel Terrington, chief executive officer of Paragon Group, said: “The strong growth in the BTL market and the excellent credit performance of BTL loans are testament to the strength of demand for private rented property. Tenant demand is driving the market forward. Rising immigration, growing household numbers, expanding student population and the increasing tendency of young people to defer their first home purchase, all mean there is a need for greater flexibility in our housing stock. The private rented sector is ideally suited to meet that need.”
Repossessions
Along with the growth of the market, the CML study showed that arrears in the sector, over three months, had fallen to 0.59 per cent, compared to the wider market’s 0.89 per cent.
Michael Coogan, director-general at the CML, said: “The BTL market has performed even more strongly than the wider market over the course of 2006. With evidence from other sources of strong tenant demand, rising rents and falling void periods, BTL looks set to continue to remain popular and successful.”
Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: “It is understandable that many lenders have diversified into BTL. This has led to greater competition which is good news for brokers and consumers. The CML figures on the spectacular growth of the BTL market in 2006 reaffirms that it is now an established market.”
He added: “It is encouraging that more than half of BTL lending in 2006 related to the purchase of new investment properties rather than remortgaging, and it would not be surprising if this trend continues.
Gus Park, Bradford & Bingley Group’s head of BTL, argued that growing knowledge and education in the sector, along with more established lender names entering the fray and a continued pensions crisis had provided food for thought for aspiring property investors and landlords. He said: “2006 was the year that BTL grew up. Landlords have greater knowledge and feel more comfortable in a market with relatively low rental yields. They are investing for the long term.
The CML’s figures show that 2006 was a spectacular year for the BTL market and we believe that there is plenty of room for further growth.”
Buy-to-let is increasingly becoming the main way in which private rented accommodation is owned and financed.”
He added that the falling repossession numbers would help breed more confidence, and prove that the market was acting with tight controls and procedures, despite being out of the scope of FSA regulation. He said: “The arrears figures show that despite some recent reports, the credit profile of buy-to-let remains extremely strong with no increase in the rate of repossessions.”
It is evident that BTL represents a fantastic opportunity and is a market that looks set to grow further as more and more people look at ways to supplement their income.
