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Buy-to-let investors buoyed by strong mortgage lending

28th July 2006 | back to article listings BACK    print this article PRINT

Potential buy-to-let property investors in the UK will be buoyed with confidence by this week's figures concerning the strong mortgage lending figures in June.

With ongoing growth and the UK property market brimming with confidence as investors make their first forays in the market, the positive figures form the British Bankers' Association (BBA) may well spur people on to purchase.

The research by the BBA found the highest-ever recorded mortgage figures for the month of June, with the gross lending total reaching £20.5 billion. This figure was 12 per cent higher than the one recorded for May and a staggering 24 per cent higher than the same month in 2005.

David Dook, BBA director of statistics, explained the reasons behind the positive figures and general ramifications for the UK property industry.

He said: "Although gross mortgage lending reached record levels in June, numbers of approvals though stronger than in mid-2005 were weaker than at the equivalent time in either 2003 or 2004. The relatively strong retail sales reported for June do not seem to have been reflected in consumer credit lending which has continued to show the weakness, particularly in credit card borrowing, which has been apparent for most of this year."

Overall there were 212,768 mortgage approvals in June – with a combined value in the region of £22.1 billion – and the number of approvals increasing by nine per cent compared to the same month for 2005. Also combined lending for loans and overdrafts increased in line with these mortgage figures – going up by £0.2 billion in June.

The figures come off the back of further research this week that many students' parents are considering exposure to the buy-to-let property market as the rates for student rent rocket nationwide. A well executed buy-to-let property plan allows investors the opportunity to gain capital returns while accruing the market value for their investment.

Howard Archer, the chief UK and European economist at Global Insight, gave his views on the June mortgage lending figures.

He said: "The current strength of housing market activity suggests that house prices may well spike higher in the near term at least, after showing some recent signs of losing momentum. A shortage of properties in some areas may also boost prices.

"This is particularly true of London and the south-east, which are currently showing the strongest increases in house prices by a significant margin. Indeed, most other areas are currently experiencing much more limited house price rises."

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