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The Buy To Let market is continuing to thrive despite the Credit Crunch, according the Council of Mortgage Lenders (CML). 1,038,000 Buy To Let loans were granted in 2007, relating to 10.3% of all outstanding mortgages and an increase of 23% on 2006.
Interestingly, this type of lending rose significantly towards the second half of the year, at a time when the amount of general mortgage lending was starting to dwindle.
The CML’s Director General, Michael Coogan, commented that demand from landlords remained strong in spite of the troubles seen by lenders like Northern Rock, stating "Tenant demand for private rented property remains strong, and Buy To Let is fulfilling an important role in helping to deliver an increased flow of high-quality homes to rent."
"Many Buy To Let loans have interest rates linked to interbank rates, so may haveseen hefty increases in payments when Libor rose to abnormally high levels in the second half of 2007. These are now likely to be returning to lower levels in line with the reduction in Libor rates since December last year," he added.
Although landlords are currently thought to be a high-risk option for lenders, the most recent figures actually show that they incur a lower level of arrears and repossessions than home buyers, with the number of Buy To Let loans that are over three months in arrears rising to 0.73% during 2007, compared with 1.1% for all mortgage borrowers. In addition to this, the repossession rate for Buy To Let properties was more than half that of the whole market, at 0.1%, and 0.23% respectively.
Malcolm Harrison of the Association of Residential Letting Agents (ARLA) was unsurprised at these findings, claiming that the market should continue to grow, “This is the most prime sort of lending. In the past two years we have seen more single households being formed, more requirement for flexibility among contract workers, and immigration pays a part too."
The Credit Crisis has spelt trouble for several of the smaller, more specialist mortgage lenders like Paragon, the UK's third biggest Buy To Let lender, who turned to shareholders for the £287m needed to stop it going under as the banks are no longer willing to prop it up. That said, most Buy To Let lenders are part of larger banking groups, such as Bradford & Bingley, HBOS, Nationwide, Lloyds TSB and Barclays so they have more security.
Even with a few smaller companies dropping out of the market, the total number of lenders has remained constant at around 95. This is due to new companies coming on board and balancing things out. In spite of this, there’s been a fall in the overall number of Buy To Let deals on offer, according to financial information service Moneyfacts. After peaking at 2,200 last July, the number has now shrunk by around a third to just 1,500.
However, Tim Hague of the Buy To Let mortgage lender Birmingham Midshires remains positive, predicting that the market will remain buoyant this year, "With demand continuing to outstrip supply, Buy To Let will continue to be in demand due to socio-economic factors such as rising immigration."
So with more BTL loans being taken out, high tenant demand and low landlord debt, the future looks bright for us as Property Investors. If you know of someone with a rental property who’s struggling to get a quick sale, give us a call on 08450 50 48 20. We are always on the lookout for new investment opportunities and could help find a buyer fast. We could even arrange for the current owners or tenants to remain in the property, renting it back from the new owner for as long as they wanted, contact us for more details... |
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