UK's Buy-to-Let Market Shows Green Shoots: CML
The UK buy-to-let market showed the first signs of stabilizing in Q209 as arrears improved and the lending contraction began to slow, according to the Council of Mortgage Lenders (CML). The number of buy-to-let loans slipped 4% from the previous quarter, as fewer active lenders have less money to lend. "So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall as landlords are helped by lower interest rates," said CML senior policy adviser Rob Thomas. Thomas added, "Whilst house price falls have limited the scope for some landlords to remortgage, there is no evidence that landlords are exiting the market in large numbers and some landlords have the opportunity to make acquisitions and take advantage of higher yields. But new lending to the buy-to-let market will continue to be constrained by the shortage of funding." The UK market, like the US market, has seen credit risk among residential mortgages rise along with falling house prices, contracting credit and growing uncertainty in the economy. Delinquencies among buy-to-let mortgages rose in the last several years as a response. But Q209 showed positive signs there, too, as delinquencies on UK buy-to-let mortgages backing residential mortgage-backed securities (RMBS) transactions appeared to be stabilizing, according to a report Friday from Standard & Poor's. Total delinquencies in UK prime buy-to-let RMBS fell to 6.1% in Q209 from 6.2%, marking the first decline in two years, according to the ratings agencies. The stock of repossession and receiver of rent cases in both UK prime and nonconforming buy-to-let markets has also stabilized, S&P said, suggesting that lenders are appointing receivers of rent for longer periods. Write to Diana Golobay.