News: Buy-to-let mortgage grows - with more to come

Recent research of mortgage advisers shows strong growth in the proportion of mortgages arranged for the acquisition of a buy-to-let property.

From just 10% of cases in December 2004, the percentage rose steadily during 2005 and early 2006 to reach 14% now. Looking further back, the proportion was just 6% in June 2001, according to Paragon Mortgages.

John Heron, managing director of Paragon Mortgages, said: "Financial advisers have benefited from the buoyancy of buy-to-let, particularly over the past 12 months. The proportion of advisers’ business represented by buy-to-let is higher than it has been for many years."

"Indeed, the survey reveals that sentiment among financial advisers is following a positive upward trend, with advisers as confident as they have been at any time since 1999."

Advisers expect to do 7% more mortgage business in the second quarter of 2006 than they did in the first quarter. This contrasts strikingly with adviser sentiment at the end of 2004, when they expected quarter-on-quarter business growth of no more than 0.9%.

Their new-found confidence looks justified. The average number of mortgages introduced per adviser during the first quarter was 27.6 cases, 9% higher than the same period of 2005 (25.3 mortgages introduced).

Mr Heron commented: "Having taken mortgage regulation in their stride, financial advisers are feeling upbeat about their current business and future prospects. Confidence hasn’t been higher since 1999."

While current business levels and future prospects remain buoyant, the research highlights that first time buyer activity continues to be subdued. The proportion of FTB loans arranged declined from 11% six months ago to 9% now. This compares with almost 20% 5 years ago.

As well as the surge in buy-to-let business, this quarter saw a significant pick-up in loans to existing homeowners who are moving, from 23% to 25%. The proportion of remortgage cases has followed a generally downward trend over the past 18 months, but still represents 51% of the total, compared with 54% in September 2005.

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