Resurgence in buy to let mortgages

Defaqto recently reported a resurgence in buy to let mortgages and activity in the buy to let market, giving the impression that buy to let is the new shining star of a currently gloomy and uncertain market.

The Defaqto report says that the number of buy to let mortgages have increased by 104 per cent since 2008. In the same period the number of lenders offering these products rose from 56 to 63. The buy to let sector significantly increased in 2011 due investors becoming tired of low interest rates on their cash savings.

Latest figures from the Council of Mortgage Lenders, show that around 34,500 buy to let mortgages were advanced in the three months to September 2011, which is 16 per cent more than the 29,700 agreed in the previous quarter. The value of buy to let lending also rose, by 18.8 per cent quarter-on-quarter, to £3.8 billion.

Paul Diggle, at Capital Economics, says: "The recovery in the buy to let sector means that, at 10.7 per cent, buy to let's share of total mortgage advances by value, is at its highest level in three years. As a share of the outstanding stock of mortgages, buy to let hit a new peak of 12.6 per cent in value in the third quarter."

Thanks to rising rents, cheap mortgages and very short void periods between tenants, the number of landlords in financial trouble is remarkably low. With credit conditions in the owner-occupier mortgage market still tight, there is unlikely to be an easing in tenant demand anytime soon which should support the number of buy to let mortgages.