Buy-to-let lending on long road to recovery

The value of buy-to-let mortgages taken out in the third quarter of 2012 totalled £4.2bn, an increase of 8% over the £3.9bn advanced in the preceding three months.

According to data from the Council of Mortgage Lenders, the number of BTL loans in the three months to the end of September totalled 34,400, 2% more than in the second quarter of 2012 (33,600).

The  data means that the value of BTL lending in the first nine months of 2012 amounted to £11.8bn, 19% higher than the £9.9bn advanced over the same period in 2011.

Despite the recovery, BTL lending is likely to total only a little over one-third of its peak in 2007.â?¨

The balance between BTL lending for house purchase and remortgaging in the third quarter remained broadly unchanged.

Lenders advanced 18,680 loans for house purchase (54% of the total) and 15,360 for remortgaging (45%). By value, lending was evenly split, with £2.03bn advanced for house purchase and an identical sum lent for remortgaging.

The average maximum loan-to-value available on buy-to-let mortgages was 75%, with an average minimum rental cover of 125%. Both measures have remained largely unchanged for more than three years. â?¨

The stock of BTL mortgages continues to grow. At the end of the third quarter, the number of outstanding loans totalled 1,444,000, worth £164.3bn (up from 1,414,000 worth £162.5bn at the end of the second quarter, and from 1,367,000 worth £156.7bn a year earlier).

As a proportion of the mortgage market overall, BTL lending remains lower than in 2007 and 2008.

CML director general Paul Smee said: “Buy-to-let lending is continuing to recover, and to grow in line with expectations.”