Take-up of buy-to-let mortgages rose by almost half in 2003, however, the buy-to-let sector still makes up only 5% of the total mortgage market, according to figures presented by the Council of Mortgage Lenders.
Investors are still "piling into buy-to-let" argues the CML, as the total number of buy-to-let mortgages rose 48% to 408,300 in 2003 from 275,500 in 2002, from an estimated 24.2bn to £39bn, of which £11.7bn is gross new lending allocated within the second half of 2003.
Average value of a new buy-to-let mortgage was £103,500 in H2 2003, says the CML, while the average percentage lent was 80%, on minimum rental cover of 130%.
At the same time, however, arrears on buy-to-let lending remains lower than most other sectors as only one in 200 have mortgage arrears or three months or more.
The CML points out at least 38% of new “advances” or mortgage applications were remortgages from other lenders, while two in every 200 mainstream home loans have arrears of three months or more.
CML director general Michael Coogan says while there is still a robust buy to let market, his comments suggest the market is due to slow down.
"With lenders sticking to fairly conservative lending criteria, and continuing low levels of arrears, the buy-to-let sector looks sustainable and robust. Nevertheless, inexperienced potential landlords should tread carefully,” says Coogan.
“Experienced landlords will take account of rental yields, property price expectations, anticipated void periods when property cannot be let, the impact of taxation, and maintenance costs. For novice landlords this is a complicated mix of factors to consider - people should only enter the buy-to-let sector 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.”IFAonline
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