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Is buy to let lending really booming?

28 May 2014

Buy to let lending is booming as banks and building societies report a huge hike in borrowing by landlords during the past year.

Specialist landlord mortgage firm Paragon Mortgages has announced a 163% increase in lending during the past year and other lenders are set to announce large increases in buy to let borrowing.

According to trade body the Council of Mortgage Lenders, the number of buy to let loans is up 56% year-on-year and the amount of money borrowed increased by two-thirds.

For March 2014, 16,200 landlords borrowed £2.2 billion to finance buy to let purchases or remortgages.

In the first quarter, just 1% more buy to let mortgages were agreed than in the last three months of 2013, but the number was 46% higher than a year earlier.

Despite mortgage companies and brokers talking up landlord confidence and their desire to buy more homes to rent out, the buy to let mortgage market is languishing at around 66% below the peak of the market in 2007-08.

Then, says the CML, buy to let hit a record 50,000 loans in the third quarter of the year.

In December 2007, the CML recorded 1,026,000 buy to let loans had been agreed worth £121 billion. In the year, 346,000 property investors took out loans worth £45.7 billion.

To compare the state of the market, in December 2013, the CML confirms the state of the market as 1,557,000 loans worth £177 million.

Looking at the statistics, the buy to let market has expanded by just 531,000 loans worth £56 billion in six years – and those loans are split evenly between purchases and remortgages.

Examining the figures suggests almost as much leading activity took place in 2007 as in the years since and the real buy to let boom was in the lead up to the financial crisis.

CML director general Paul Smee said: “All types of lending show positive year-on-year growth but the rate of increase is not as frenetic as at the end of 2013. Buy-to-let lending continues to recover and regain market share.”