Monday 22 April 2013

Interesting views on 'Buy To Let' from Bank of England

There's some interesting views on the 'Buy To Let' (BTL) market in the Bank of England's April 2013 'Trends in Lending' report.
In an earlier post, I explain my view why now is a good time to start a BTL portfolio -
Here are some extracts from the Bank of England report which reflect the following -
  • BTL loans up
  • More BLT loan options on the market
  • BLT interest rates down and arrears falling
  • All positive news
The Bank of England report -
Gross lending to buy-to-let (BTL) borrowers in 2012 was at its highest in four years (Chart A).


The share of BTL lending in overall mortgage lending was 11%. Total BTL lending volumes were, in broad terms, evenly split by purpose between house purchase and remortgaging. The share of new house purchase loans accounted for by BTL loans was broadly unchanged at 14%.
Demand for BTL lending increased in 2012 Q4 and 2013 Q1, having fallen for most of 2012, according to respondents to the Credit Conditions Survey. Contacts of the Bank’s Agents recently reported that steady growth in BTL demand was driven by strength in the rental market.

In recent discussions, some major UK lenders noted that the rise in tenant demand partly reflected some prospective FTBs turning to the private rental market due to difficulties in raising a sufficient deposit.
There are indications that the availability of BTL mortgages has increased over the past year. During the crisis, some lenders withdrew from the BTL market and lending criteria also tightened. In recent discussions, some major UK lenders reported that new entrants and returning lenders to the BTL
mortgage market had increased availability.

The proportion of BTL mortgages more than three months in arrears has been falling since 2009 Q1 according to data from the CML, which may have increased the attractiveness of BTL lending.
Quoted rates for fixed-rate BTL mortgages fell in the second half of 2012, according to data from Moneyfacts Group (Chart C).

Swap rates fell by a similar amount, such that spreads over relevant swap rates were broadly unchanged.
Floating-rate BTL spreads were also little changed over the same period.
Spreads over relevant swap rates were unchanged in 2013 Q1 for fixed-rate BTL mortgages while spreads over Bank Rate for floating-rate mortgages narrowed. Respondents to the Bank’s
2013 Q1 Credit Conditions Survey reported a significant reduction in BTL secured lending spreads.
Respondents to the Credit Conditions Survey expected the availability of secured credit at high LTV (above 75%) ratios to increase slightly in the coming quarter. For BTL lending, lenders in the survey expected a significant increase in demand and lower spreads in 2013 Q2. In recent discussions, most
major UK lenders expected a fall in pricing at higher LTV ratios during 2013. Lenders also expected growth in lending to both FTBs and the BTL sector to contribute to an increase in gross mortgage lending in 2013.