The figures from banks and building societies show that the number of buy-to-let mortgages, taken out by landlords purchasing properties, has risen to its highest level in more than seven years.
According to data from the Council of Mortgage Lenders (CML) 33,600 new mortgages were taken out between July and September, making it the busiest quarter since the end of 2007.
Figures released on Tuesday by the Office of National Statistics showed that while 25% of people thought paying into a workplace pension scheme was likely to prove the best way to save for retirement, 44% thought property was the more likely way to make the most of their cash. Poor returns from savings accounts, coupled with rising prices and rents, have made buying property an increasingly attractive investment for savers.
CML figures showed that 11,300 buy-to-let loans, worth a combined £1.5bn, were advanced in September; an increase of more than a third on the same month in 2014.
The September figures were down on the recent peak of 11,800 in July, but followed a strong August, to bring the highest quarterly figure since before the credit crisis.
The CML said that despite the strong growth, buy-to-let remained a minority of its members business.
Paul Smee, director general of the CML, said “Buy-to-let continues its growth this period, but at 18% of new lending in September, remains the fourth largest lending type behind first-time buyers, home movers and remortgages.
“There were five times as many house purchase loans to homeowners as buy-to-let landlords in September, and the growth in buy-to-let lending largely continues to reflect its more belated recovery from recession.”
During the downturn, buy-to-let lending declined more than lending to homeowners, as it looked a greater risk to invest in property by individuals and lenders. CML said that loans to homeowners for house purchases declined by 50% in volume terms from 2007 – 2009, buy-to-let loans for house purchases declined by 71% in the same period.
However, the market has turned up sharply and lenders are competing to offer the best deals to landlords. During the quarter, 37,400 loans were granted to investors who were remortgaging.
In the emergency budget in July, the Chancellor outlined changes that will remove some of the tax reliefs available to buyers. Also, the Treasury is due to launch a consultation on whether the Bank of England should be given new powers to restrict this type of lending. The latest figures however, suggest that buy-to-let investors are undeterred.
Rob Weaver, director of investments at property crowdfunding platform Property Partner, said UK investors have continued confidence in buy-to-let.
“As an asset class, buy-to-let is also benefiting from the growing concern about the state of the global economy – it is seen as a safe port in a storm”
“With the Bank of England once again dovish on interest rates, this will represent a further fillip for people turning to bricks and mortar as an investment”
The CML’s data also showed year-on-year rises in the number of first-time buyers and home movers taking out mortgages.
First-time buyers took out 28,600 home loans in September, up 10% on the previous year and 2% on Augusts’ figures. Home movers took out 33,800, a 4% fall on Augusts’ numbers, but up 15% on September 2014.
Smee said “The market was a slow starter this year, but this quarter shows it is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the New Year”