London-brokerage John Charcol saw a 40 increase in let-to-buy deals in 2012 which it says is a sign of the growing demand for rental property.
Under let-to-buy, a borrower rents their existing home in order to buy a new main residence.
John Charcol senior technical manager Ray Boulger says: “The proportion of our clients choosing let-to-buy when they were moving home fell year on year by 37 per cent in 2009, the same year that buy-to-let lending generally hit rock bottom.
”However, the subsequent bounce back has been even more pronounced than in the buy-to-let market generally. We saw an increase of 45 per cent in let-to-buy lending in 2010, modest growth of only 10 per cent in 2011 and then a further surge last year with an increase of 40 per cent.”
The increase comes in the wake of strong buy-to-let lending figures last year. The Council of Mortgage Lenders reported gross buy-to-let lending of £16.4bn in 2012, representing 11.5 per cent of the total market.
Boulger says although let-to-buy only accounts for a modest part of this increase in buy-to-let lending, some homeowners obtain permission to let from their mortgage lender, thus retaining their existing residential mortgage, rather than remortgage to a buy-to-let deal. So the actual number of mortgages supporting the buy-to-let market are likely to be in excess of the Council of Mortgage Lenders’ figures.