Business Loans

UK Finance – Housing Strategy

Buy-to-let lending fell by 56% to £1.8bn in the final quarter of 2023 compared to the same period last year, figures from UK Finance have shown.

The trade association says this marks the lowest level of BTL activity in a decade outside of the pandemic months when the housing market was shut down.

Loans also fell by 55% year-on-year to £4.3bn in Q4 2023.

There was a big jump in the number of BTL loans in arrears of 2.5 percent or more of the outstanding balance – up 124 percent year-on-year to 13,570 in Q4 2023.

However, UK Finance points out that only 0.68% of all BTL mortgages are in arrears, which is lower than home owner mortgages, as it has been for many years.

There were 500 BTL returns in the quarter, an increase of 56% year-on-year.

The average interest coverage ratio (or rental income expressed as a percentage of the mortgage interest) has fallen by 58 percent year-on-year, and now stands at 180%.

In a post on the trade association’s website, UK housing finance policy manager Ronnell Reffell and data analyst Ermir Selmani said challenging market conditions, and particularly the current high interest rate environment, had a significant impact on the BTL market.

They write: “Interest rates play an important role in real estate investment, directly influencing the borrowing power and homeowners’ return on investment.

“With higher interest rates reducing interest rates, we have seen a weaker demand for new BTL mortgages.”


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