Buy-to-let lending falls as repossessions rise

Published 27th Aug 2008

The golden era for property investors appears to be over as industry figures show buy-to-let lending fell in the first six months of the year.

Investors have been defeated by tighter lending criteria in the same way as the mainstream market, with 31,900 fewer loans made to landlords in the past six months, according to the Council of Mortgage Lenders (CML).

However, with strong demand for rental accommodation the investor market remains marginally more resilient than the mainstream market, with demand for loans falling by 18%, in contrast with 28% for normal homebuyers.

CML director general, Michael Coogan, said: "The shortage of mortgage funding is creating similar problems for buy-to-let landlords as it is for other borrowers.

"However, we expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now."

The proportion of buy-to-let mortgages that end in repossession has also risen and is now the same as the wider market at 0.16%.

According to homeless charity Shelter, between the first half of 2007 and the first half of 2008, the number of buy-to-let mortgages ending in repossession rose by 100%, compared to a 48% rise across the mortgage market as a whole.

This makes renters just as prone to repossession as homeowners.

Adam Sampson, chief executive of Shelter, said: "Sadly, the impact of repossession can be even greater for tenants, who, despite paying rent on time, can find themselves with very few rights and the first they even know about it is when the bailiffs start banging on the door."

He said mortgage lenders must take responsibility and make sure they inform both owners and tenants when taking action to repossess, so tenants are aware they are about to lose their home.

In the specialist lending sector the repossession trend is also on the rise for borrowers with a history of credit problems, according to financial research firm Standard & Poor's.

It says one in four sub-prime borrowers is now struggling to keep up with rising repayments after being turned down for a remortgage.

Figures from the CML for July showed the total number of all borrowers having problems making mortgage repayments rose to 1.33% in the first half of the year from 1.1% last year.

At the last count, 155,600 people were three months or more behind on repayments for their mortgage.

Source: ' 'guardian' '

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