Huge surge in UK buy-to-let mortgages

According to the latest figures released by the UK's Council of Mortgage Lenders (CML), the UK buy-to-let property sector saw a huge growth in popularity 2006. Throughout this period, 330,000 new investors took out buy-to-let mortgage in the UK: worth a cumulative total of £38.4 billion. This represents a 48 percent rise in the number of buy-to-let investors and a 57 percent increase in the value of buy-to-let mortgages from the previous year's figure.

Moreover, the CML’s figures also show that in the last six months of 2006 British mortgage lenders lent a whopping £21 billion to buy-to-let investors. This represents the largest amount lent to buy-to-let investors in the UK since records were first kept in 1998.

Commenting on the latest figures to be released, Michael Coogan, Director-General of the CML, said that: "The buy-to-let market has performed even more strongly than the wider market over the course of 2006. With evidence from other sources of strong tenant demand, rising rents and falling void periods, buy-to-let looks set to continue to remain popular and successful."

Buy-to-let mortgages, where landlords borrow money from UK mortgage lenders in order to purchase properties that they then rent out to tenants, now account for approximately 9 percent of all mortgage lending in the UK – with an estimated total outstanding 850,000 buy-to-let mortgages worth in the region of £94.8 billion. Total mortgage lending in the UK last year was £346 billion.

Not everyone, however, is happy with the latest developments in the UK's buy-to-let mortgage sector. Opponents of the scheme say that mortgage lenders in the UK are now too free in providing buy-to-let mortgages and that landlords who fail to rent their property, or who are faced with prolonged void periods, are faced with repossessions and long-term money problems.

However, the CML's figures would appear to refute this as they actually show a fall in mortgage areas for buy-to-let mortgages in 2006 – with only 1,142 buy-to-let properties being repossessed in 2006. This equates to 0.14 percent of all buy-to-let mortgages and is slightly lower than the number of repossession in the wider mortgage market, which stood at 0.15 percent for 2006.

Nonetheless, Nigel Terrington, chief executive of Paragon, who along with Bradford & Bingley and HBOS are the biggest providers of buy-to-let mortgages in the UK, sees only further growth in the buy-to-let mortgage sector.

Following the release of these latest figures by the CML, Terrington issued a statement in which he said: "Tenant demand is driving the market forward. Rising immigration, growing household numbers, expanding student population and the increasing tendency of young people to defer their first home purchase all mean there is a need for greater flexibility in our housing stock."

Richard Smith
16.02.07

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