News: Buy-to-let Mortgage Lending Falls 18%

Wed, 27 Aug 08

Buy-to-let lending has declined by 18% during 2008, according to latest figures released by the Council of Mortgage Lenders.

The figures show that for the first half of 2008 there were just 144,600 buy-to-let loans agreed, down from 176,500 in the second half of 2007 and 169,500 in the first half of 2007.

The shortage of mortgage funding has been blamed for the downturn, however the CML points out that the rate of decline in the buy-to-let market is far lower than the mortgage market as a whole, which has decreased by 28% since the second half of 2007.

“The shortage of mortgage funding is creating similar problems for buy-to-let landlords as it is for other borrowers,” said CML director general, Michael Coogan.

“However, we expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now,” he added.  

The CML figures also show that there are now 1.1 million buy-to-let mortgages in the UK, worth around £132.5 billion. This represents 9% of the total mortgage market.

 Larger deposits and equity is now needed to secure a buy-to-let deal, with the maximum loan of 83% being offered on the value of a property, compared to 85% last year.

The figures also show that the threat of repossession looms large for a growing number of buy-to-let landlords.

While arrears in the buy-to-let sector are still lower than the wider mortgage market they are increasing, from 0.73% of all loans  in the last half of 2007 to 1.1% in the first half of 2008.

“Some landlords are encountering higher mortgage rates, as a result of the credit crunch, while being unable to increase rents in the short term,” a statement from the CML added.  

By Joe Lepper

See also: Buy to Let Mortgage Advice

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