New buy-to-let lending declines in 4th quarter of 2008 by 12%

Posted under General by Jermaine

Latest data from the Council of Mortgage Lenders (CML) reveals that new buy-to-let lending continued to go down in the fourth quarter.

Compared to third quarter, volume was down by 12% to 37,000 and value declined by 19% to £3.9bn. When annualised, the fall amounts to 56% and 65% by volume and value respectively.

Buy-to-let loans formed 10% of all mortgages amounting to £138bn outstanding at the end of last year.

CML claims that many buy-to-let borrowers were getting benefitted from highly low mortgage costs and with increasing demand for rental accommodation, many borrowers will have improvement in their net income.

However there is hardly any improvement in mortgage payments. At the end of 2008, 2.55% buy-to-let homeowners were over 3 months in arrears compared to 1.88% for wider market.

According to CML there are numerous factors influencing arrears rate. Most buy-to-let lending being interest-only, data shows greater number of months in arrears than capital-repayment borrowing. Some frauds involved no mortgage or rent ever being paid.

Other factors include over-supply in certain locations and financial difficulties of landlords, who are forced to divert property income elsewhere rather than using it to pay mortgages..

The repossession rate stood at 0.11% in 4th quarter, which is in line with wider market.

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