At the end of the year there were an estimated 1.3 million buy-to-let mortgages outstanding, worth £152 billion, accounting for 12% of the total value (11.5% by number) of mortgages outstanding.
The total value of buy-to-let lending in 2010 was £10.4 billion (22% higher than in 2009), and the total number of loans advanced in the year was 102,000 (10% higher than the previous year).
In the fourth quarter of 2010 there were 28,600 new buy-to-let loans advanced, worth £3 billion. This was a rise of 6% by volume and 7% by value from the third quarter.
In terms of loan performance, the buy-to-let sector has seen a further improvement in the number of mortgages in arrears. While direct comparisons with the owner-occupied sector are difficult because of the additional option of appointing a "receiver of rent" on a buy-to-let loan, the general picture is that the share of arrears cases accounted for by buy-to-let loans is now only just over the overall buy-to-let share of the mortgage stock, having previously been notably higher than the owner-occupied sector.
Low interest rates are a key driver of this narrowing of the gap, since the largely interest-only buy-to-let sector gains greater benefit from lower interest payments than the predominantly capital-and-interest owner-occupied sector.
Looking ahead to the prospects for the buy-to-let sector in 2011, the CML expects strong rental demand to remain, driven not least by the continuing deposit constraints to entry to the owner-occupier market.
CML director general Michael Coogan said: "Funding remains a key constraint on growth in buy-to-let lending, but demand seems to be resilient and loan performance has improved.
“Looking ahead, loan performance could potentially be adversely affected by rising rent arrears or interest rate rises, but at present there is no indication of these pressures materialising in practice. There is also a strong counterbalancing growth influence on the buy-to-let market, as tenant demand seems set to remain high in the face of continuing deposit constraints to entering the owner-occupier market."
Paragon Group chief executive Nigel Terrington said: “This is an encouraging set of figures and shows that the buy-to-let market is on the front foot again and entering a period of growth. A number of new lenders entered the buy-to-let market in 2010 and, of course, Paragon also returned to new lending, creating competition and choice for landlords.
"It is important that landlords have access to suitable finance to enable them to grow their property portfolios. The UK is experiencing unprecedented levels of tenant demand and the private rented sector needs to expand. Capital Economics estimates that the private rented sector will be home to nearly one in five households by 2015, up from one in seven currently, so it is crucial that the UK has a vibrant and healthy buy-to-let market."
David Whittaker, managing director of Mortgages For Business, added:“If Merlin were around today he’d swap the wand and pointy hat for an investment portfolio and a range of assured shorthold tenancies because the signals for the buy-to-let market are very encouraging. 2010 was a good year for the sector and conditions are set for the magic to continue thanks to the Arthurian wizard’s namesake project.
"Banks will have to lend more this year and who better to lend to than professional investors with large deposits and proven track records of repayment. Property prices have been broadly flat over the last few months and they’re not going to shoot into the stratosphere anytime soon. Rental demand is soaring and this has given landlords the perfect opportunity to cash in on the easing lending market and conjure up record rents.”