Buy to let underpins the housing market

Buy to let underpins the housing market

9:40 AM, 21st July 2011, About 13 years ago

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Buy to let borrowing is underpinning the mortgage market as the Bank of England and lenders report a surge in activity from property investors.

The signs are that lenders are inviting more applications from landlords and diverting funds from first time buyers and other borrowers to meet the demand.

The latest figures suggest a 15% rise in buy to let mortgages, mainly purchases, has taken over as first time buyer loans decreased by 17% across the same period.

The Bank of England says lenders have seen a’marked pickup in demand for buy-to-let lending, which was expected to continue’.

The sentiment is echoed by the Council of Mortgage Lenders (CML), the trade body that acts as the voice of all the UK’s major banks and building societies.

The CML has released figures that show all mortgage lending increased 16% from the £10.8 billion lent in May, but was 3% lower than £13.0 billion in June last year.

This is the highest monthly total since July last year (£13.3 billion).

Gross lending for the second quarter of 2011 was an estimated £33.5 billion, an 11% increase from the first three months of this year (£30.1 billion) and a 3% decrease from the second quarter of 2010 (£34.4 billion).

Lending in the first half of this year totalled £63.7 billion. This is only slightly below the first six months of 2010 (£64.1 billion).

CML chief economist Bob Pannell said: “The UK economy continues to experience disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market.

“This backdrop weighs negatively on purchase decisions relating to home ownership. By contrast, landlord activity appears to have picked up recently and, with evidence of strong rental demand, this should help to underpin activity over the coming months.

“Recent emotive headlines on repossession prospects appear overplayed, given that the state of our economy does not warrant large interest rate rises for the foreseeable future. But we do expect to see moderately higher arrears and possessions through the second half and into 2012, as we have previously forecast.”

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