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Buy-to-let borrowing in the UK up 17% in H1

Buy-to-let borrowing in the UK reached record levels during the first half of 2006, with lenders advancing 152,500 loans, worth GBP17.5 billion.

The market for the buy-to-let mortgage increased 17% in volume and jumped 20% in value over the previous record totals posted in the second half of 2005.

According to the Council of Mortgage Lenders (CML), there are now 767,000 outstanding residential buy-to-let mortgages in the UK, worth a total of GBP83.9 billion.

The slower increase in lending across the wider market means the residential investment mortgage market now accounts for 8% of the total value of outstanding UK lending, compared to 7% in the first half of 2005.

The CML also revealed that the proportion of buy-to-let mortgages in arrears of three months or more rose slightly, from 0.68% of the stock to 0.73% in the first half of 2006. But arrears remained lower than in the wider mortgage market, where 0.96% of borrowers were three months or more in arrears in the same period.

Typical underwriting criteria in the buy-to-let market remained unchanged, with an average maximum loan-to-value ratio of 85% and lenders requiring rental income to exceed mortgage repayments by at least 25%.

Commenting on the latest figures, CML director general Michael Coogan said: The buy-to-let market remains robust, underpinned by strong rental demand. But investors have shown that they are quick to adjust to changing market conditions, so the view that interest rates are now more firmly on an upward trend is likely to cause the rapid growth of buy-to-let investment to slow in the coming months.

Fundamentally, however, the rental market remains sound and looks set to continue to offer good long-term prospects for astute investors.