Half of all buy-to-let mortgages are now base rate or LIBOR linked tracker mortgages and two thirds are interest only, with no capital repayment. These figures are shown in the latest quarterly Survey of Lending Trends issued by the ARLA Panel of buy-to-let Mortgage lenders yesterday. Click here for the full pdf report.

Summary

• Fixed rate loans accounted for 19.1% of all buy-to-let lending by the ARLA Panel, against 27.8% in the previous quarter.
• Discount rates fell to 16.6% from 23.5% in the final quarter of last year.
• The average number of loans each month during the quarter to 31st March rose by 4.9%, from 1,142 to 1,198.
• The amount borrowed rose by only 1.2% from £94.4 million a month to £95.5 million.

ARLA, the Association of Residential Letting Agents, believes that these figures emphasise that the buy-to-let sector is a stable, sophisticated market and that this augurs well for much needed continued investment in the Private Rented Sector.

“Buy-to-let is the only regular source of new investment in the residential rental market and this is needed to provide real choice in housing for many sectors of the economy,” commented John Crossley, Chairman of ARLA, announcing the latest figures released yesterday.

The survey follows the lending trends experienced by the ARLA panel of lenders. They include Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages, Standard Life Bank and The Mortgage Business. Four of these lenders participated in the survey.

The latest figures show that the average individual loan made in the first three months of the year fell by 4.6% from £82,700 in the previous quarter to £79,700.

Although prime Central London showed a sharp drop in the quantity of loans, down by 32.4%, the amount lent rose by 56% from an average of £154,100 to nearly a quarter of a million, at £240,400. For the rest of central London, the average loan remained unchanged at £146,600. For Greater London, the average rose 7.4% from £112,900 to £121,200.

Throughout the rest of the South East, loan amounts were broadly steady, showing a decrease of only 0.5% from £92,900 to £92,400.

Throughout the rest of the country, including Scotland and Wales, average loan amounts showed very marginal changes. Average loans in the South West were £80,400, in the Midlands £67,100, the North West £55,100 and the North East £54,100. In Scotland, Wales and Northern Ireland, the average amount borrowed was £53,500.

The mechanics of borrowing are now shown to vary. In prime Central London, only two thirds of borrowers used financial intermediaries to source and arrange mortgages. In all other areas of the country, more than three-quarters of all buy-to-let borrowers went to financial intermediaries to arrange their mortgages.

Said John Crossley: “The use of tracker mortgages rather than fixed or discounted mortgages shows sophistication in the market place and confidence in the economy remaining a low interest economy for the foreseeable future.”

“This should mean that the private rented sector should be able to continue to rely on mature borrowers to fund the housing needs of those who are unable or unwilling to take on the responsibilities of a mortgage, for a whole range of different circumstances.”

“A strong private rented sector also helps to oil the wheels of the house sales market as it becomes common to rent between moves.”