Buy to let mortgage lending tops £5bn

Pound coins, stacked, with monopoly-style houses on them

According to recent figures, buy to let lending topped £5bn in the second quarter of 2013 – an almost five-year high following the previous peak in the third quarter of 2008.

Data published by CML (the Council of Mortgage Lenders) on Thursday 8 August showed that, between April and June of 2013, 40,000 buy to let loans – collectively worth £5.1bn – were advanced to landlords in the UK.

The number and value of loans were around a fifth higher (19% and 21% respectively) than that of those advanced in the preceding quarter. Though this high is still less than half that seen at the peak of the housing boom in 2007 (when 93,000 loans, collectively worth £12.7bn, were advanced), the figures suggest that the recovery of the buy to let market is gathering pace.

As a result of comparative stagnation in the residential market, buy to let accounted for 13% of outstanding mortgage lending at the end of June.

Net lending

Net lending – gross lending minus total capital repayments during the same period – is more representative of the actual growth of the mortgage sector, and here we see that buy to let really is surging.

Less the total repayments of £1.7bn for the second quarter, net buy to let lending actually stood at £3.4bn – which, given that net mortgage lending as a whole is close to negative (as people are repaying existing credit faster than they are borrowing), is exceptionally robust.

Though landlords are more likely than owner-occupiers to choose interest only mortgages, as the lower repayments increase their rental yields, we can take these figures as a very encouraging sign indeed.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.