BORROWING for buy-to-let investments, one of the chief drivers of the last property boom, has risen again to reach new record levels.
The Council of Mortgage Lenders published figures yesterday showing a fresh increase in the number of mortgage advances for buy-to-let properties. There were 152,500 advances in the first half of this year, up 56 per cent from the first half of 2005.
The steep rise may prompt concern that many buyers could find it difficult to meet their loan obligations from rental income after the Bank put up interest rates this month and hinted that they may rise again.
However, Kelvin Davidson, of Capital Economics, said: “Lending criteria remain relatively stringent, suggestding that the boom has a stable footing.”
The level of rent generated in the letting market has actually risen in recent months. According to the Association of Residential Letting Agents (Arla), the average annual rental return as a proportion of the value of houses was 5.2 per cent in May, up from 4.9 per cent in November.
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Malcolm Harrison, of Arla, said that most of those who invested in buy-to-let property did so for the long term. He added that rents were “strong, but not soaring by any means”.
The figures also showed a slight pick-up in the number of bad loans, with the proportion of buy-to-let mortgages in arrears of three months or more rising from 0.68 per cent at the end of last year to 0.73 per cent in the first half of this.
There are now 767,000 outstanding residential buy-to-let mortgages in the UK, worth a total of £83.9 billion. The market accounts for 8 per cent of all mortgage borrowing, up from 7 per cent in the first half of 2005.