Buy To Let Loan Approvals Declining

Wed, 27 Aug 2008

Buy-to-let lending fell for the first time in three years during the first six months of 2008 as the market was hit by the credit crunch, latest figures have revealed.

According to the Council of Mortgage Lenders (CML), a total of 144,600 buy-to-let loans were advanced during the six months to the end of June - down from 169,500 in the same period of 2007 and 18 per cent fewer than the last six months of 2007.

There are now 1,103,000 outstanding buy-to-let loans in the UK, accounting for around 9 per cent of all outstanding mortgages, while the total value of loans is valued at £132.5 billion - around 11 per cent of the UK market.

The group said that limited mortgage wholesale funding, which was particularly important for several buy-to-let lenders, has dried up during the past year due to the credit crunch, resulting in the decline.

The credit crunch was also cited as the main contributor to a surge in the number of landlords who fell behind on mortgage repayments .

Arrears have risen in a similar fashion to owner occupier mortgages, with around 1.1 per cent of loans at least three months in arrears in the first half of the year – nearly double the 0.63 per cent that were behind during the first half of 2007 and the highest figure since the group began collecting data on the market in 1998.

The number of repossessions on buy-to-let properties has also increased to 0.16 per cent, up from 0.1 per cent a year ago, and the same as for the wider mortgage market.

Commenting on the figures, CML director general Michael Coogan, said: "The shortage of mortgage funding is creating similar problems for buy-to-let landlords as it is for other borrowers."

"However, we expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now."
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