The supply of new buy-to-let mortgages has dried up by the biggest margin on record, with lending to property investors now at a five-year low.
Fourth quarter stats from the Council of Mortgage Lenders show loans fell by more than half, both in volume and value terms compared with the same period last year.
There were 37,000 new buy-to-let loans worth £3.9bn in the quarter, representing a 56% slump in availability and a 65% slide in value against the same time in 2007.
The CML, whose records began in 2006, said this was almost certainly the lowest quarterly lending figure since 2003, based on previous half-yearly data of the market.
The council’s own data show that for 2008 as a whole, buy-to-let lending accounted for 10.6% of the value of gross mortgage advances, down from 12.3% in 2007.
Buy-to-let mortgages are more likely to show debt than owner-occupier mortgages, yet the CML said this may be due to investor mortgages often being ‘interest only.’
The higher arrears rate may also relate to fraud , where over-valuations led to a larger loan than the sale price of the property, with no rent or mortgage ever being paid.
Either due to fraud or the economy, some landlords failed to make repayments after using their rental income to meet other commitments, including their own owner-occupier mortgage.
“The position of tenants is obviously a matter of concern if they are paying rent, but their landlords are defaulting on the mortgage,” the CML said.
“This is not primarily a buy-to-let problem; it is a greater problem where the landlord has taken out the mortgage as a home-owner, but then failed to seek permission from their lender to let out the property.”
Repossessions of buy-to-let property for 2008 as a whole rose to 4,000, up from 2,000 in 2007, though the rate was “broadly in line with the wider market,” the council said.
It added that from April 6, all tenants will receive longer notice of any court hearing for mortgage possession, of around 5-7 weeks.
But the onus will be on tenants to open any correspondence addressed to “the occupier” to make good on the new notice period lenders will offer before potentially taking action.
More positively, many buy-to-let borrowers will now be benefiting from significantly lower mortgage costs than when they first took out their loan.
The CML reflected: “With tenant demand remaining strong in most areas, many landlords will therefore be experiencing an improvement in their net income.”
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