Buy-to-let mortgages on the up

The number of home loans for landlords reached record levels in the first six months of the year, figures showed today.

The Council of Mortgage Lenders (CML) reported an increase of 17% in the number of buy-to-let mortgages in the first six months of the year, and a 20% increase in the total value of the loans.

There are now 767,000 residential buy-to-let mortgages outstanding in the UK, with a combined value of £83.9bn.

However, there was also a slight increase in the number of people who fell behind with repayments on their loans, with 0.73% of buy-to-let mortgages in arrears of three months or more, compared with 0.68% in the previous six months.

Michael Coogan, director general of the CML, 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," he said.

Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, said economic prosperity and population migration from EU accession countries had increased rental demand, making conditions better for buy-to-let investors.

"The news is not so good for first-time buyers, with house prices continuing to rise and the alternative of renting steadily becoming more expensive," said Mr Khatri.

"Rents are rising at their fastest pace since July 2001. Buyers will continue to face a property glass ceiling while rents and house prices rise together," he added.

The residential buy-to-let mortgage market now makes up 8% of UK lending, compared with 7% in the first half of 2005.