Buy-to-Let Market Grows

The buy-to-let market grew by 7% in 2010, according to the latest data from the Council of Mortgage Lenders. At the end of the year there were an estimated 1.3 million buy-to-let mortgages outstanding, worth £152 billion, accounting for 12% of the total value (11.5% by number) of mortgages outstanding.

The total value of buy-to-let lending in 2010 was £10.4 billion (22% higher than in 2009), and the total number of loans advanced in the year was 102,000 (10% higher than the previous year).

In the fourth quarter of 2010 there were 28,600 new buy-to-let loans advanced, worth £3 billion. This was a rise of 6% by volume and 7% by value from the third quarter.

In terms of loan performance, the buy-to-let sector has seen a further improvement in the number of mortgages in arrears. While direct comparisons with the owner-occupied sector are difficult because of the additional option of appointing a "receiver of rent" on a buy-to-let loan, the general picture is that the share of arrears cases accounted for by buy-to-let loans is now only just over the overall buy-to-let share of the mortgage stock, having previously been notably higher than the owner-occupied sector.

Low interest rates are a key driver of this narrowing of the gap, since the largely interest-only buy-to-let sector gains greater benefit from lower interest payments than the predominantly capital-and-interest owner-occupied sector.

Looking ahead to the prospects for the buy-to-let sector in 2011, the CML expects strong rental demand to remain, driven not least by the continuing deposit constraints to entry to the owner-occupier market.