Buy-to-let lending continued to rise dramatically in the second half of last year, the Council of Mortgage Lenders (CML) said this week. Many landlords also remortgaged. The total of outstanding buy-to-let mortgages rose by 48 per cent from 275,500 at the end of 2002 to 408,300 at the end of 2003.
The total outstanding value of buy-to-let lending is estimated to have reached £39bn, compared to £31bn at the end of the first half of 2003 and £24.2bn at the end of 2002. Despite this rate of growth, buy-to-let is still only 5 per cent of the total mortgage market.
Gross new buy-to-let lending in the second half of 2003 was £11.7bn, an increase of 75 per cent on the £6.7bn lent in the second half of 2002, and 54 per cent up on the £7.6bn lent in the first half of 2003. An estimated 38 per cent of new advances were remortgages from other lenders. The average value of a new buy-to-let mortgage was £103,500 by January. Lenders' average maximum percentage advance on buy-to-let remained unchanged at 80 per cent.
Arrears on buy-to-let lending stayed low, at only one in 200 falling behind by three months or more. This is half the level of arrears in the mainstream home-owner mortgage sector.
Michael Coogan, the CML's director-general, said: "Investors are still piling into buy-to-let. With lenders sticking to fairly conservative lending criteria, and continuing low levels of arrears, the buy-to-let sector looks sustainable and robust.
"But inexperienced landlords should tread carefully. Experienced ones will take account of rental yields, property price expectations, anticipated void periods when property cannot be let, the impact of taxation, and maintenance costs. Novices should enter the buy-to-let sector only if they intend to hold their property portfolio for some time. Buy-to-let is far from a one-way bet to make a quick buck."