BTL lending slumps to 2003 levels

According to CML statistics, there were 37,000 new loans in Q4 worth £3.9bn, 12% down on Q3 and 56% down on the same period in 2007.

It says outstanding BTL mortgages represented around 10% of all loans, and around 11% of the value of all lending, at the end of 2008.

Additionally, arrears rates on BTL mortgages at the end of 2008 hit 2.32%, significantly higher than the comparable rate for the wider market of 1.88%.

The CML says fraud may be one of a number of factors influencing the arrears rate, with over-valuations to achieve a larger loan than the sale price of the property a common event. It adds tenants failing to pay their rent and landlords diverting their income away from their BTL mortgage may be other contributory factors.

In terms of repossessions, 0.11% of BTL mortgages were taken into possession in the fourth quarter of 2008, a rate broadly in line with the wider market.

However, the CML says BTL borrowers will now be benefiting from "significantly" lower mortgage costs than when they first took out their loan. "With tenant demand remaining strong in most areas, many landlords will therefore be experiencing an improvement in their net income," it says.

Categories: Mortgages