Belfast Telegraph

Buy-to-let lending rise bucks falling trend in mortgages

By Vicky Shaw

Mortgage lending to buy-to-let landlords has grown, while lending to first-time buyers and home movers has fallen back compared with a year ago, figures from banks and building societies show.

In May, 22,700 mortgages with a collective value of £3.4bn were handed out to first-time buyers, marking a 16% decrease compared with May 2014, although it was a slight 1% increase on April 2015, the Council of Mortgage Lenders (CML) said.

Meanwhile, some 26,300 mortgages with a total value of £5bn were advanced to home movers in May, marking a 15% fall on a year earlier, but a 2% increase compared with April.

Buy-to-let lending bucked the falling year-on-year trend, with 17,500 loans with a collective value of £2.5bn handed out in May. This is a 12% jump compared with a year ago and a 1% increase compared with April.

Interest in the buy-to-let market has increased in recent years as poor returns on savings in the low interest rate environment have driven investors to hunt for decent returns on their cash elsewhere. Property prices have grown strongly in some areas of the UK in recent years.

The upswing in properties being snapped up by buy-to-let investors has been cited as one factor which has added to the pressure on first-time buyers hunting for a starter home.

There have also been suggestions that the pension freedoms introduced in April which give people aged 55 and over more flexibility over their savings could prompt more people to take the plunge into property investing.

A recent mortgage price war, with lenders shaving many of their rates to the lowest they have ever offered, means that both first-time buyers and home movers taking out new home loans are paying record low proportions of their incomes towards their mortgage repayments, the CML said.

Paul Smee, director general of the CML said: "Activity has broadly been down on last year but we expect it to rise in the summer months as, with historically low interest rates and a competitive lending environment, borrowing conditions are relatively favourable.

"But we cannot ignore the continuing affordability constraints caused by high house prices relative to earnings which will work in a contrary direction."

Belfast Telegraph