Buy-to-Let Lending Shows Signs of Recovery

By:  Madalena Penny

With about as much consistency as Cheryl Cole’s X-Factor status and all the buoyancy of Katie Price’s knicker elastic,  buy-to-let statistics are indicating some variable views on the BTL sector.

According to UPAD’s recent research measuring landlord confidence, it’s something of a mixed bag.  Surprisingly in contradiction to a steady stream of tenant-demand exceeding supply, confidence in this sector has fallen 3% from October.

Predicting Interest Rates

And yes, you would be right if you guessed that the overall BTL financial restrictions and instability are the cause of landlord consternation.  With 20 consecutive months of an unchanged 0.5% interest rate, national economists have forecast that a slight rise is expected near the end of 2011, while others are edging it around the 2012 mark.

Needless to say that any economist’s forecast will not instil confidence for a landlord with a sizeable portfolio, which even the smallest raise in interest rates could mean bankruptcy.

BTL Resurgence & Growth

Nonetheless, despite its instability and fragility, Q3 this year has shown some slight improvement.  There was a 33% rise in BTL lending compared to Q3 2009, with a total of £2.8billion advanced by lenders and a 12% increase from the previous quarter.  A total of 1,500 landlords had properties repossessed in Q3 and 1,300 were appointed receivers of rent.
Director General of the CML, Michael Coogan said:

“We would expect buy-to-let demand to pick up further if current rising rental trends continue and house prices remain broadly stable.
‘However, there is short-term uncertainty as a result of the unresolved debate on housing benefit and landlords’ response to new limits.

‘The bigger question is whether there will be sufficient supply side capacity to meet that demand, as the number of buy-to-let lenders dwindled in the credit crunch after 2007 and is yet to be fully restored.”

Sim Sekhon of the landlord legal network ‘Legal 4 Landlords in response to the recent statistics said:

“This years growth in the private Rented Sector is an encouraging indication.  However, there are a majority of landlords frustrated by the lack of BTL products available by lenders and the austerity with which they are granted.”

Earlier in May this year a report on Buy-to-Let by Datamonitor predicted a significant growth in BTL lending, rising from £8.5billion in 2009, £15.8billion on 2012, £20.2billion in 2013 and £25.6billion in 2014.  It’s forecast based on tenant-demand and lack of available housing stock will be worth keeping in mind.