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Buy-to-let lending continued to rise dramatically in the second half of 2003. Like their home-owning counterparts, many landlords also took advantage of remortgaging opportunities, according to the latest results from the Council of Mortgage Lenders.
The CML's survey is the most comprehensive source of data on the buy-to-let sector. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are around eleven and a half million mortgages in the UK, with loans worth around £750 billion.
The total number of outstanding buy-to-let mortgages rose by 48% from 275,500 at the end of 2002 to 408,300 at the end of 2003. The total outstanding value of buy-to-let lending is now estimated to have reached £39 billion, compared with £31 billion at the end of the first half of 2003 and £24.2 billion at the end of 2002. Despite this massive growth, buy-to-let represents is still dwarfed by conventional mortgage lending, representing only 5% of the total mortgage market.
Gross new buy-to-let lending in the second half of 2003 totalled £11.7 billion (75% higher than the £6.7 billion lent in the second half of 2002, and 54% higher than the £7.6 billion lent in the first half of 2003). As in the mainstream residential sector, gross lending was boosted by remortgaging. An estimated 38% of new advances were remortgages from other lenders.
The average value of a new buy-to-let mortgage was £103,500 in the second half of 2003. Lenders' average maximum percentage advance on buy-to-let remained unchanged at 80%, with average minimum rental cover requirements of 130% of rental income.
Arrears on buy-to-let lending remain very low, with only one in 200 loans experiencing arrears of three months or more. This is around half the level of arrears in the mainstream home-owner mortgage sector.
Commenting on the new data, CML Director General Michael Coogan said:
"Investors are still piling into the buy-to-let market. With lenders sticking to fairly conservative lending criteria, and continuing low levels of arrears, the buy-to-let sector looks sustainable and robust. Nevertheless, inexperienced potential landlords should tread carefully.”
“Experienced landlords will take account of rental yields, property price expectations, anticipated void periods when property cannot be let, the impact of taxation, and maintenance costs.”
“For novice landlords this is a complicated mix of factors to consider - people should only enter the buy-to-let sector if they intend to hold their property portfolio for some time. Buy-to-let is far from a one-way bet to make a quick buck."
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Underwriting Criteria |
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Mortgages outstanding at end of period |
Gross new advances in period |
Loans 3+ months in arrears, % of mortgages outstanding at end of period |
Maximum LTV |
Minimum rental cover, % of rental income |
Aggregate loan
ceiling to
individual investor |
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Number |
£m |
Number |
£m |
% number |
% |
% |
£ |
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Annual |
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1998 |
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28,700 |
2,000 |
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0.70 |
75 |
130 |
500,000 |
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1999 |
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73,200 |
5,400 |
44,400 |
3,100 |
0.50 |
75 |
130 |
600,000 |
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2000 |
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120,300 |
9,100 |
48,400 |
3,900 |
0.47 |
78 |
130 |
500,000 |
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2001 |
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185,000 |
14,700 |
72,200 |
6,900 |
0.55 |
80 |
130 |
500,000 |
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2002 |
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275,500 |
24,200 |
130,000 |
12,200 |
0.42 |
80 |
130 |
750,000 |
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2003 |
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408,300 |
39,000 |
187,800 |
19,300 |
0.51 |
80 |
130 |
1,000,000 |
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Half-yearly |
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1998 |
H2 |
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28,700 |
2,000 |
. |
. |
0.70 |
75 |
130 |
500,000 |
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1999 |
H1 |
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58,800 |
3,600 |
21,800 |
1,500 |
0.45 |
75 |
130 |
600,000 |
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H2 |
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73,200 |
5,400 |
22,600 |
1,600 |
0.50 |
75 |
130 |
600,000 |
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2000 |
H1 |
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89,000 |
6,600 |
21,300 |
1,700 |
0.39 |
75 |
130 |
1,000,000 |
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H2 |
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120,300 |
9,100 |
27,100 |
2,200 |
0.47 |
78 |
130 |
500,000 |
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2001 |
H1 |
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144,700 |
11,300 |
30,700 |
2,800 |
0.55 |
80 |
130 |
500,000 |
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H2 |
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185,000 |
14,700 |
41,500 |
4,100 |
0.55 |
80 |
130 |
500,000 |
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2002 |
H1 |
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232,900 |
19,100 |
58,700 |
5,500 |
0.50 |
80 |
130 |
750,000 |
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H2 |
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275,500 |
24,200 |
71,300 |
6,700 |
0.42 |
80 |
130 |
750,000 |
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2003 |
H1 |
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332,500 |
31,000 |
74,600 |
7,600 |
0.46 |
80 |
130 |
1,000,000 |
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H2 |
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408,300 |
39,000 |
113,200 |
11,700 |
0.51 |
80 |
130 |
1,000,000 |
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