UK Buy-to-let mortgage lending has increased by 20% year-on-year during 2012 to reach its highest level since the UK property crash of 2008.
The appetite for buy-to-let mortgages has been boosted by strong demand from frustrated first time buyers, who end up as tenants as they are unable to get themselves on the property ladder. This strong tenant demand has in turn pushed up private rented sector rental prices as tenants find that they have become financially trapped.
£16.4 Billion (GBP) worth of buy-to-let mortgages have been taken out over the last year, showing a 19% annual increase, the Council of Mortgage Lenders (CML) said.
Around £4.6 Billion (GBP) worth of buy-to-let mortgages were advanced in the last three months of 2012, representing a 10% increase on the previous quarter.
Despite the recent signs of a UK housing market recovery, the 2012 lending figures are still way below the £28.5 Billion (GBP) worth of buy-to-let mortgage loans advanced to property investors and landlords in 2008.
Paul Smee, CML Director General said: “Buy-to-let is currently benefiting from strong tenant demand, which is likely to continue. Buy-to-let mortgage loan performance compares favourably with the residential property 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.”
Recent research by the property portal Rightmove, found that 12.5% of accidental and reluctant landlords, who originally only accepted tenants because of the difficulties selling their residential property in what was the toughest UK residential sales market in recent history, now plan to buy another rental property specifically for investment purposes this year.
75% of professional landlords surveyed also said they intended to expand their rental property portfolios in 2013.
Chief Property Economist at Capital Economics, Ed Stansfield, said: “While buy-to-let mortgage lending is heading in the right direction, we struggle to see why this sector will buck the still subdued trend facing the wider mortgage lending market. Buy-to-let rental returns will look attractive to landlords compared with the current poor returns on savings, especially for professional landlords who are able to boost their rental incomes by cutting out letting agent and management fees.”
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