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BoE: Rising BTL lending cannot fill first-time buyer gap
Buy-to-let funding has strengthened faster than residential in the downturn, but is unlikely to fill the gap left by the drop in first-time buyer lending, according to the Bank of England.
In its Trends in Lending report for July, the Bank said that gross buy-to-let lending is likely to grow in the short term, with lenders expecting increased demand and lower spreads on buy-to-let lending over the next quarter.
It added that this will be supported further by the growing size of the private rented sector.
However, the Bank of England noted that buy to let remains far short of filling the gap left by the reduction in first-time buyer lending.
It highlighted CML data showing that Q1 2011 gross lending to first-time buyers was £4.2bn compared to £13.3bn at its peak in Q3 2006.
By comparison, buy-to-let lending for house purchase was £1.4bn in the first quarter of this year.
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The report said: “It seems unlikely that rises in buy-to-let lending will fill the gap left by the reduction in first-time buyer lending.”
It added: “Consistent with [Q1 lending figures], in recent discussions most lenders noted that the buy-to-let market was unlikely to drive a wider housing market recovery, given its relatively small size.”
David Whittaker, managing director of Mortgages for Business, said: “Buy to let can never replace first-time buyer lending. It would have to expand exponentially to fill the gap.
“Buy to let funding is improving steadily and we still have the expected arrival of Abbey and Yorkshire into the sector. That will be a significant step in today’s market, but buy to let is still only 12% of the mortgage market.”