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Funding shortage is limiting lending but buy to let market appears to be stabilising

The buy to let and property investment market has shown initial signs of stabilising during the second quarter as arrears have improved considerably and the decline in new lending has begun to slow. This is according to figures from the Council of Mortgage Lenders (CML).

There were 21,600 new buy to let loans in the second quarter, just 4% less than the 22,400 in the three months prior. Reliant on wholesale buy to let funding, the property investment market has suffered an abrupt contraction during the credit crunch.

There are now less active lenders in the private rental market and they now have less money to lend. Therefore the seven consecutive quarters of decline have left the gross lending of buy to let at very low levels.
The drop during the second quarter was mainly looking at remortgages, which was down 15% from the previous quarter, whereas the number of house purchase loans increased 5%.

The gross total of buy to lets was £1.9 billion in the second quarter, 5.6% of the gross total lending, compared to £8.9 billion quarter two, which was 11.9% of the total gross mortgage lending. Buy to let now represents 11.5% of the total value of UK mortgages outstanding.

Buy to let arrears showed significant improvements in all aspects. There were 29,400 mortgages in arrears of more than three months, down from 35,600 in the quarter before. The number of mortgages in arrears of more than 1.5% of the balance outstanding fell from 28,800 in late April to 22,900.