Borrowing by landlords has reached its highest level for over two years in the period of July to September 2010. It has increased by a third on the same period of last year and is now at £2.8bn.
The CML (Council of Mortgage Lenders) figures show that advances have been gradually improving since the lending levels hit a low of £1.9bn during the period of April to June last year. However, despite recent improvements the lending level remains a fraction of the £12.4bn which was advanced to buy-to-let investors during the third quarters of both 2006 and 2007.
Lending in the third quarter of this year was up 12% on the previous quarter and the Council of Mortgage Lenders said the increase was driven by the ongoing demand for rental property, as buyers are worried about taking on a huge expense in the current climate and the ones who want to get on the property ladder are still struggling to get a mortgage.
Michael Coogan, director general of the CML, said “We would expect buy-to-let demand to pick up further if current rising rental trends continue and house prices remain broadly stable. However, there is short-term uncertainty as a result of the unresolved debate on housing benefit and landlords’ response to new limits.
“The bigger question is whether there will be sufficient supply side capacity to meet that demand, as the number of buy-to-let lenders dwindled in the credit crunch after 2007 and is yet to be fully restored.”
Tenant demand is very strong at the moment and the private rented sector needs to expand to cope with the increased number of tenants who wish to live in a rented property on which the owner will have taken out landlord insurance.
The Council of Mortgage Lenders figures also showed that one and a half thousand landlords had a property repossessed during the third quarter of the year. This figure was 100 less than during the previous quarter.