Buy to let lending outpacing residential loans, new analysis suggests

Buy to let lending in the UK increased by 20% year on year in the first three months of 2015, outpacing residential lending which was up by just 1.6%, a new analysis shows.

Total lending for the quarter stood at £36.2 billion, a year on year increase of 5.4%, according to an analysis report from Equifax Touchstone which covers 92% in the intermediated lending market.

The data also shows that the average value of each mortgage was £177,060 for residential compared to £170,730 in the final quarter of 2014, and £151,033 for buy to let compared to £145,017 in the previous quarter.

March was the top sales month for mortgage brokers in eight years. Lending was up 24.3% on February 2015, reaching £15 billion. The market saw UK wide improvement with only two postcode areas, Perth and the Western Isles, reporting negative growth during the period.

However, despite growing lending levels, the number of active brokers in the market has fallen in the last 12 months, down from 8,288 in the first quarter of 2014 to 8,028 in the first quarter of 2015.

The firm says that this market consolidation makes it even more important for mortgage providers to identify which networks and firms are leading the charge and successfully responding to the rapidly changing mortgage landscape and the requirements of the Mortgage Market Review.

‘In March we saw lending power ahead and the sluggish trend witnessed at the end of last year has been reversed. There have been lingering doubts over the market recovery and it is encouraging to see such positive growth,’ said Iain Hill, Equifax Touchstone relationship manager.

‘While traditional savings accounts continue to offer low returns, savers are looking for alternative ways to invest their money, prompting substantial growth in the buy to let market. An oversupply of people and an undersupply of homes makes buy to let an attractive proposition and we expect this trend to continue to gather pace over the coming months,’ he added.

Separate research by Paragon Mortgages has revealed that intermediaries are writing more mortgage business with longer term initial rates. The results from the specialist lender’s quarterly intermediary tracking survey for the first quarter of 2015 shows 30% of cases were for terms of five years or more trackers and fixed rates, up from 26% in the previous quarter.

At the same time, there was a reduction in two and three year terms, dropping from 71% to 66% and intermediaries have reported a decline in popularity of tracker rate products since the middle of 2012. Survey results showed a continuous fall from the third quarter of 2012 to the second quarter of 2014. However, this trend appears to be shifting, with tracker products accounting for 18% of cases in the first quarter of 2015 compared to 15% in the previous quarter.
Despite the modest improvement in the sale of tracker products, fixed rates continue to be the most popular with intermediaries recommending a fixed rate product in four out of every five sales.

Generally, intermediaries are also feeling more positive about future levels of mortgage business, with on average those surveyed expecting a 6% increase in case volumes in the second quarter.

‘The gap between fixed rate and tracker rate sales widened significantly from the start of 2012, and it is not since 2010 that we have seen tracker and fixed rates selling in equal numbers,’ said managing director John Heron.

‘Whilst concerns over imminent increases in interest rates may have abated, it is clear that landlords are continuing to take a cautious approach by selecting fixed rates in much larger numbers and over longer periods,’ he added.

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Source: Property News Spain