Buy-to-let market continued to grow in third quarter

Over the same period, the value of mortgages advanced in the sector grew by 19%. The data shows that the pick-up in buy-to-let lending that began in the second quarter has continued.

In the three months to September, a total of 34,500 buy-to-let loans were advanced, an increase from 29,700 in the preceding quarter.

The value of lending totalled £3.8 billion, up from £3.2 billion. On both measures, buy-to-let lending was at its highest level since the final quarter of 2008.

The number and value of outstanding buy-to-let loans also continued to grow. At the end of September, there were 1,378,700 loans outstanding, worth £157 billion, up from 1,296,700 (worth £150 billion) 12 months earlier.

In the third quarter, there were 18,580 loans for the purchase of buy-to-let properties, accounting for almost 12% of all house purchase loans.

But the proportion remains significantly lower than the former peak in the first quarter of 2008, when 32,650 mortgages for buy-to-let property purchase accounted for 19% of all loans for house purchase.

Buy-to-let house purchase lending

In the third quarter, the number of buy-to-let mortgages more than three months in arrears declined from 28,300 (1.57% of the total) to 26,300 (1.45%).

There was, however, a small increase in the number of buy-to-let properties taken into possession (from 1,500 in the second quarter to 1,600) although, as a proportion of all buy-to-let properties, the figure remained unchanged, at 0.08%.

Commenting on the latest data, CML director general Paul Smee, said:

"With tenant demand remaining strong in the rental sector, some existing buy-to-let landlords have been expanding their portfolios and the growth that returned to the sector in the preceding quarter has continued.

"The recovery of buy-to-let from its low point in 2009 has helped improve supply and choice in the rental market. Despite recent improvements, however, buy-to-let lending volumes are still only around one-third of their former peaks."

Paul Hunt, managing director of Phoebus Software said:

“The growth of Buy-to-Let lending in the third quarter will be welcome to all as it will boost the supply of private rental accommodation available, but there’s still plenty more scope for increasing activity in the sector before the heat will go out of the rental market for landlords.

"Lenders have been encouraged to expand their Buy-to-Let activity as, according to LSL’s Buy-to-Let index, yields have reached 5.3% - their highest level in over three years. The UK’s average rent has hit record highs for the last five consecutive months.

"For both lenders and landlords, Buy-to-Let offers strong opportunities for expansion and as first time buyers continue to struggle to put together large deposits for purchase, this is sure to continue."

David Whittaker, managing director of Mortgages For Business, said:

“The autumn rush for rental property is always a busy time for landlords but this year has been particularly bountiful for property investors. Stagnant house prices, plenty of BTL mortgage products and a boom in bridging lending has bolstered activity in residential property investment.

"And the relentless demand on the private rental sector from would be buyers frozen out of the market by record inflation and cautious lenders has kept upward pressure on rents.

"The continuing record low base rate will ensure these conditions last well into next year and with property prices unlikely to grow significantly in the short to medium term investors will be able to support demand by expanding their portfolios further.”