The Council of Mortgage Lenders (CML) has published figures revealing a slump in mortgage lending for September. In contrast though, the buy-let market is growing rapidly.
In the third quarter of this year, the number of buy-let mortgage approvals increased to the highest levels seen since 2008.
New landlords will be able to profit at a time when rent is at a record average high of £718. The average figure increases to £1,000 for London.
The CML found that the number of buy-let mortgages acquired increased by 16% in the third quarter of the year.
CML Director General Paul Smee commented; “With tenant demand remaining strong in the rental sector, some existing buy-let landlords have been expanding their portfolios and the growth that returned to the sector.î
The CML also revealed that loans for house purchases and remortgages fell for September. The number of house purchases fell by 2% compared to August, and the value fell by 5%.
Thousands of hopeful renters are increasingly struggling to save for the large deposits which are required by banks. As a result, the dip in mortgage lending will have a knock-on effect on the UK economy.
“Owning a home has been a natural aspiration for generations of Britons since the 1950s, and should not become the preserve of a lucky few. Without a steady stream of first and second-time buyers, the housing market freezes and the whole economy suffers,î said John Cridland, Director-General of the Confederation of British Industry.
ìHousing is a vital part of the UK’s economy and infrastructure, and the stagnation seen in house sales has made the economic downturn worse. It accounted for around a third of the 6% drop in GDP during the recession, while the number of first-time buyers fell from a peak of 167,400 in 2001 to 36,200 in 2011,î he continued.
Research by Defaqto found that mortgage lenders prefer buyers with a large deposit. Lenders welcome those borrowing higher Loan-Value (LTV) ratios who will be paying significantly more interest on average.
In fact, those borrowing at 90% LTV will experience 1%-2% higher annual interest than those borrowing at 70% LTV.
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