subject: Mortgage gloom brings buy-to-let boom - March 2011 [print this page] Mortgage gloom brings buy-to-let boom - March 2011
HOME buyers who have been squeezed out of the mortgage market are igniting a boom in rental properties, new figures show.
There was a 10 per cent jump in the number of buy-to-let mortgages advanced in 2010, according to the Council of Mortgage Lenders (CML).
At 10.4 billion, the value of buy-to-let lending was more than a fifth higher than in 2009, and the market now accounts for 11.5 per cent of all mortgages outstanding, double the 2005 level.
The growth reflected a relaxation of buy-to-let mortgage criteria and a surge in tenant demand from would-be buyers unable to raise sufficient deposits. Mortgage lending reached a nine-year low at the end of last year, and the ongoing restrictions in the market have given buyers no option but to find a home to rent or extend their existing lease.
The latest figures from website Citylets show the average monthly rent in Scotland was 2.2 per cent higher at the end of 2010 than in the same period in 2009.
Michael Coogan, director general of the CML, said:"Funding remains a key constraint on growth in buy-to-let lending, but demand seems to be resilient and loan performance has improved."
He predicted the tenant demand would remain high, as a result of the continuing obstacles to entering the owner- occupier market.
But Ed Stansfield, chief property economist at Capital Economics, pointed out that the buy-to-let growth last year was underpinned by higher levels of remortgaging by landlords.
He said:"To the extent that new house purchase is the better indicator of confidence in the market, the data suggest that in the final months of the year, like owner-occupiers, landlords also approached the housing market with rather more trepidation", said Mr Stansfield.
And he warned that the number of tenants falling behind on their rent payments could pose a renewed threat to landlords in the months ahead.
The CML said 1.7 per cent of buy-to-let mortgages were in arrears by three months or more, down on the amount in 2008 and 2009, but more than three times the proportion five years ago.
Mr Stansfield said:"The squeeze on household incomes and high levels of unemployment among younger workers could well trigger a rise in rent arrears."
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