Buy-to-let lending has reached its highest level since quarter three 2008 in both the number and value of loans, data published by the Council of Mortgage Lenders recently revealed.
But speaking to the Observer newspaper at the weekend Lamont said: “The rapid boom in the market should not be a cause of unqualified celebration because of the impact that an inevitable rise in interest rates will have on lenders and buyers.”
Lenders advanced 40,000 mortgages worth £5.1bn in the second quarter of 2013, 19% higher by volume and 21% higher by value than the preceding three months and 19% and 31% respectively, year on year.
Over the last six months lenders such as Accord, Coventry and Mortgage Trust have been cutting rates and launching new products to tempt more landlords into the market.
And with Carney’s Forward Guidance announcement pegging the base rate of 0.5% to unemployment, promising not to increase rates until unemployment falls below 7%, confidence in the market is set to continue.
Lamont said that with record low interest rates the chancellor and ministers should be looking on with renewed caution.
He told the Observer: “The Bank and the government need to keep a careful eye on the buy-to-let market. This is expanding very rapidly at the moment and it was an over-rapid expansion of it that caused the demise of Bradford & Bingley.”
Lamont is believed to fear that the traditional measure of an affordable mortgage which compares the ratio of wages to the mortgage balance is being disregarded by lenders and landlords.
Paragon, the specialist buy-to-let lender, reported in its quarterly confidence tracking survey of mortgage brokers that all respondents expected to carry out more buy-to-let business this year.
John Heron, director of mortgages at Paragon, said: “There has clearly been a surge in buy-to-let activity just as we have seen in the wider mortgage market. The primary driver for this growth would appear to be strong rental demand which should ensure a sustainable future for buy-to-let.”
The majority of intermediaries surveyed, 81%, said they would describe the current level of landlord demand as strong or stable with only 10% stating in their view demand was weak.
And today, writing in his blog on Mortgage Introducer, Phil Rickards, head of BM Solutions, says he’s expecting the market to flourish.
“At half year, the buy-to-let market is at £9.3bn and if it continues on this upwards trajectory it could exceed the market expectation of £19bn if the tail wind were to keep on blowing.”
