Buy-To-Let Market Thriving

According to the Council of Mortgage Lenders (CML) the buy-to-let market in the UK is still going strong. The UK saw the number of buy-to-let mortgage loans rise by 23%, these type of loans account for 10.3% of all outstanding mortgages in the country.nnLending for buy-to-let properties started to rise during the latter half of 2007, when the number of applications for standard mortgages began to initially fall. CML’s general director, Michael Coogan, said: "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."nn"Many buy-to-let loans have interest rates linked to interbank rates, so may have seen hefty increases in payments when Libor rose to abnormally high levels in the second half of 2007. nn"These are now likely to be returning to lower levels in line with the reduction in Libor rates since December last year."nnAcross the industry it is a common misconception that lending to landlords is high-risk lending, however according to statistics it is this section of the market who have lower levels of arrears and repossessions than other types of home owners. The continued popularity for buy-to-let mortgages has been good news for lenders, brokers, advisers and mortgage lead companies.nnThe total of buy-to-let mortgages that were found to be more than three month in arrears rose in 2007 from 0.58% to 0.73%. This figure was still much lower than the 1.1% within all mortgage borrowers who were three months behind with their payments.nnThe number of repossessions of buy-to-let properties is just 0.1%, compared to 0.23% shown within the whole market. Malcolm Harrison, a spokesman of the Association of Residential Letting Agents (ARLA) believes there are a number of reasons that the market will keep on growing.nnHe said: "None of this is surprising, 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."nnIn the midst of the credit crunch and the banking nightmare that caused Northern Rock’s downfall, many other smaller specialist mortgage lenders have also faced problems and have fallen off the radar. nnIn some cases even larger companies have faced troubled times. Paragon, the UK’s third biggest buy-to-let lender, has needed to source £287 million to keep in business because banks are not willing to lend them any more money.nnHowever this is not a problem for most lenders as they belong to large banking groups such as Nationwide, Bradford & Bingley, HBOS, Lloyds TSB and Barclays. The overall number of lenders has remained almost steady at 95, as new companies have appeared while some have vanished.nnAccording to Moneyfacts, however, the number of buy-to-let mortgage deals on offer has fallen. After rising as high as 2,200 in July 2007, this number has reduced to 1,500. Industry experts do believe that the market will stay afloat throughout 2008.nTim Hague of Birmingham Midshires, a buy-to-let mortgage lender, said: "With demand continuing to outstrip supply, buy-to-let will continue to be in demand due to socio-economic factors such as rising immigration."nnSo it seems that landlords are making the most of the effect of the credit crunch on the popularity of renting. As first-time buyers cannot afford to get on the property ladder themselves, and are getting turned down for mortgage applications, the demand is strong for rental properties. More experienced and financially stable applicants will be tested to the same strict criteria when applying for a mortgage, but are more likely to be accepted by lenders.nnnnnnn