Buy-to-let lending £16.4 billion in 2012

On a quarterly basis, there were 36,700 buy-to-let loans, worth £4.6 billion, advanced in the fourth quarter – up from 34,300 loans worth £4.2 billion in the third quarter, and 34,200 loans worth £3.9 billion in the fourth quarter of 2011.

By number, a total of 136,900 buy-to-let loans were advanced during 2012 (of which nearly half were for remortgage). The total number of buy-to-let mortgages outstanding at the end of 2012 stood at 1,445,300, accounting for 13% of all mortgages.

Lenders typically required a minimum 25% deposit on buy-to-let loans throughout 2012, with an average minimum rental cover requirement of 125%.

In terms of loan performance, 1.14% of buy-to-let loans ended the year in arrears of more than three months, compared with 2.03% of owner-occupier loans. On the other hand, the annual repossession rate at 0.48% was higher than the equivalent owner-occupier rate of 0.27%, reflecting the different considerations involved in the two sectors.

CML director general Paul Smee comments:

"Buy-to-let is benefiting from strong tenant demand, which is likely to continue. Loan performance compares favourably with the owner-occupier sector, and the overall outlook for the buy-to-let sector is positive.

"Landlords who can demonstrate a strong track record are in a good position to expand their portfolios. However, new potential landlords need to tread carefully before entering the buy-to-let market; considerations such as landlord licensing reinforce the need for potential landlords to gain a strong understanding of the legal and operating environment.

"Looking ahead, we will find out later in the year whether or not buy-to-let lending ends up within the scope of mortgage regulation as a result of the European Directive currently being finalised. If this does happen, policymakers must ensure that the very clear differences between buy-to-let and owner-occupier lending risks and operations are fully recognised in any regulatory framework that may emerge."

David Whittaker, managing director of Mortgages for Business, commented: “2012 was clearly a good year for the buy to let mortgage sector although personally, I had thought that it would be slightly stronger, possibly hitting the £17bn mark. It’s unclear whether the CML figures include lending on more complex residential investments. If they don’t, the real figure could indeed be higher. It will be interesting to see what the CML forecasts for 2013. I believe we’ll see buy to let lending increase 10-15% year-on-year, possibly even up to £20bn if the more complex transactions that attract bespoke pricing are included in the figures.”

Stuart Law, Chief Executive of Assetz said:

"This is just the start of a continued rise in BTL lending which we expect to finish the year up a further 10-20% on 2012 figures, underlining a third year of growth. This is a reflection of the realisation of many people that buy to let provides an instant and reliable income and the increasing demand for rental property from solvent tenants is giving greater confidence to this sector."

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