Buy to Let Keeps Mortgage Market Afloat

Buy to Let Keeps Mortgage Market Afloat

16:14 PM, 12th September 2011, About 13 years ago

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"Nearly half investors remortgage for new property purchases"

Capital raising to invest in more property is driving the buy to let remortgage market, according to a lender.

Almost half of landlords (47 per cent) told Paragon Mortgages that their main reason for remortgaging was to raise funds to expand their portfolios.

More than a third (35 per cent) switched mortgages for a better interest rate. A few (8 per cent) were not happy with their lender and a similar number were encouraged to go to take another deal by their lenders.

John Heron, managing director of Paragon Mortgages, said: “About two thirds of properties in the private rented sector have no mortgage whilst the average loan-to-value on those properties with a mortgage is 48 per cent, so there is a huge amount of equity in the sector that landlords are looking to utilise to help fund portfolio growth.

“Council of Mortgage Lenders figures show there was a significant increase in buy-to-let remortgage cases between the first and second quarters of this year and it appears a large proportion of that is from landlords releasing equity to generate seed capital for portfolio expansion. In a market characterised by high rental demand, we could see this becoming more commonplace.”

Meanwhile, the latest Council of Mortgage Lenders borrowing figures for July show the number of new mortgages (48,800 worth £7.3 billion) and remortgages (31,500 valued at £4 billion) are around the same level as June.

Although remortgaging is up year-on-year by 11 per cent, lending on home loans is down 12 per cent.

CML director general Paul Smee said: “The UK mortgage market is currently holding steady. But August saw global financial turmoil and unrest closer to home and recent Bank of England approvals figures do not necessarily suggest a continuing upturn in lending in coming months.

“However, it is likely that this reflects weak consumer appetite for borrowing, more than any additional constraints on the availability of mortgages.”

As a trend, mortgage lending often spikes in June as mortgage lenders look to meet their half-yearly sales targets.

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