ARLA bulletin finds financial risk to investors not increasing

ARLA found that the average buy-to-let loan in the six months to March this year was £80,200. This figure has changed little from the average buy-to-let loans taken in 1999, of between £67,000 and £69,400, when compared to the change in house price inflation generally. Throughout 2000 and 2001, the average loan was £80,240, although they briefly reached £102,000 for three months in the winter of 2000/2001.

John Crossley, chairman of ARLA, said: "This latest Bulletin demonstrates that the levels of borrowing and fixed rate budgeting in the buy-to-let market are both sensible and sustainable. These investors can help to provide good quality rental property throughout the country for a long time to come."

While over half of all buy-to-let borrowing was to fund investment outside London and the South East, 48.3 per cent of buy-to-let mortgages was for London and the South East. Of this 1.5 per cent was for prime central London properties, 24.8 per cent for the rest of London and 22 per cent for the rest of the South East.

In comparison, South West England and South Wales accounted for 12.3 per cent, the Midlands 12.2 per cent, North West England and North Wales together 14.3 per cent, North East England 11.1 per cent and Scotland and Northern Ireland 1.8 per cent.

However, while the average loan is just over £80,000, in central London the average property was bought for £202,800, which is four times the average for the North West and North Wales at £49,300.

ARLA found that fixed rates are now the most popular mortgage for buy-to-let, accounting for 55.1 per cent of buy-to-let loans. Discounted rates totalled 16.1 per cent.

Most buy-to-let mortgages are taken out on an interest only basis, with 70 per cent of investors in central London, the South East, North West and North Wales, borrowed on an interest only basis. In total, 59.4 per cent of all buy-to-let loans are interest only.

Crossley said: "These figures demonstrate caution and sophistication, not as some reports would suggest, casual careless investing. There are some property hotspots that effect Buy to Let investment but it must be remembered that the Private Rented Sector is a fluid, fast moving market and generally finds its own level quickly. Buy to Let investors should also remember that while capital appreciation is very high, as it is in many areas at the moment, yields will be low. As the old saying has it: You cannot have your cake and eat it."