Buy-to-let mortgage market 'showing signs of life'

The buy-to-let mortgage market grew for the first time in two years during the third quarter, figures showed today.

A total of £2.1 billion was advanced to investment landlords during the three months to the end of September, 10% more than during the previous quarter, the Council of Mortgage Lenders said.

But despite the improvement, the figure was still the second lowest since records began in 2006 and well down on the peak of £12.4 billion which was lent during the third quarter of 2007.

There was also a 10% increase in the number of buy-to-let mortgages advanced during the three months, at 23,700, up from 21,600 during the previous quarter.

CML director general Michael Coogan said: "At this stage, the recovery is modest - but the figures show that buy-to-let is here to stay.

"Buy-to-let lenders are among those facing some of the biggest challenges in raising mortgage funding, so the improved figures are all the more welcome."

A total of £1.19 billion was advanced to landlords buying a property during the third quarter, with a further £840 million lent to people remortgaging.

The CML said remortgaging levels had been held back during the period by the fact that no mortgages were available to people borrowing more than 80% of their property's value.

It said landlords with less than a 20% equity stake in their property were being forced to stay on their lenders' revert rate when their existing deal came to an end, although it added that with interest rates remaining low, this was relatively painless for them.

There were 1.2 million buy-to-let mortgages with a total value of £144.2 billion outstanding at the end of the September, representing 11% of all mortgages.

Ed Stansfield, property economist at Capital Economics, said: "The buy-to-let sector has been harder hit than the mainstream mortgage market and today's data suggest that it may be slower to recover.

"Although lending volumes rose for the first time in two years in the third quarter, the recovery was far less marked than in the mainstream sector."

There was a slight increase in the number of buy-to-let properties that were repossessed by lenders during the third quarter, with this rising from 1,400 to 1,600, the equivalent of 0.14% of all buy-to-let loans.

But there was a 32% fall to 1,700 in the number of properties that had a receiver of rent appointed - an alternative to repossession that enables tenants to stay in their home.

The number of landlords who were in arrears also fell for the third quarter in a row, with 20,500 people in arrears of at least 1.5% of their outstanding mortgage at the end of September, down from 22,900 three months earlier.