There is something deeply distasteful about Britain's obsession with buy-to-let. It is extremely speculative and crowds out first time buyers.
Still, you would think that banks would have learnt something over the last couple of years about risk, and in particular, about lending to highly over-leveraged individuals. Not so. Insofar as there is any mortgage lending going on, buy-to-let is taking up a large proportion of new loans.
According to the Council of Mortgage Lenders, buy-to-let lending rose by 12% during the three months of summer. That amounted to 26,900 buy-to-let loans advanced, worth £2.8 billion. This was a quarterly rise of 8 percent by volume and 12 percent by value. It is the second consecutive quarterly increase in lending. Compared to the third quarter of last year, the volume of lending was up 14 percent and the value up 33 percent, from 23,700 and £2.1 billion respectively. A startling recovery, don't you think?
At the moment, there are about 1.3 million buy-to-let mortgages out there, which accounts for over 10 percent of all home loans. But it remains a shaky business, top-full of dodgy characters. So why to UK banks continue to pour cash into this shady area of the housing market?