Buy-to-let market grows for first time in two years: CML

At £2.1bn, lending was 10% higher than in the previous three months. Q3 2009 also saw a similar first increase in two years in the number of buy-to-let loans advanced, from 21,600 to 23,700.

However, the CML stated that the recovery in buy-to-let lending was from a low base, with current lending volumes sharply lower than their peak in 2007.

The number of outstanding buy-to-let loans grew to 1,205,000, representing 11% of all mortgages by the end of the quarter compared to 1,180,000 three months earlier. The value of outstanding buy-to-let mortgages increased by 2.5% to £144.2bn.

Within the buy-to-let market, both lending for house purchase and remortgaging grew in the last three months.

As with the mainstream mortgage market, however, house purchase lending was stronger. Remortgaging capacity was constrained by the unavailability during the quarter of any buy-to-let mortgages at over 80% LTV. Landlords with existing mortgages at a higher LTV are therefore effectively obliged to stay on their existing lenders' reversion rates.

Low borrowing costs also contributed to a continued improvement in cases of buy-to-let arrears and an improvement in the number of landlords facing enforcement action.

For the third quarter in a row, there was a decline in the number of buy-to-let mortgages with arrears of more than 1.5% of the balance. In the last three months, the number has fallen from 22,900 to 20,500, representing 1.7% of outstanding buy-to-let mortgages.

The number of properties taken into possession rose in Q3, from 1,400 to 1,600, equivalent to 0.14% of all buy-to-let mortgages.

Over the same period, however, there was a sharp decline - from 2,500 to 1,700 - in the number of arrears cases in which a receiver of rent was appointed.

Michael Coogan, director general of the CML, said that although the recovery is modest, the figures show that buy-to-let is here to stay.

He commented: "Buy-to-let lenders are among those facing some of the biggest challenges in raising mortgage funding, so the improved figures are all the more welcome. Future demand for housing in all tenures supported by lenders will remain strong, despite mortgage funding constraints and low construction rates."

Coogan added that with funding for social housing under pressure, the private rented sector has a strong future.

"Mortgage lenders will have an important role to play in it, and will continue to help improve choice and standards for private tenants," he concluded.