Buy-to-let (BTL) gross mortgage lending totalled £42.2bn in 2019, reflecting a rise of 4.2% against 2018, new data published by UK Finance has revealed.

The banking body also revealed that gross mortgage lending to individuals totalled £268bn, which was down 0.3% on 2018.

Banks (+£2.7bn) and specialist lenders (+£1.1bn) showed the strongest annual growth in the BTL sector, while also seeing stable growth in the full market respectively, with banks up £7.5bn, and specialist lenders up £0.4bn.

The data also showed that the full market saw falls in lending from building societies (-£1.8bn) and mid-tier lenders (-£3.5bn), while the BTL sector also saw falls of -£1.1bn in lending for building societies, and -£0.8bn for mid-tier lenders.

UK Finance suggested that one of the possible explanations for the growth seen in large banks could be a decline in lending from direct competitors, coinciding with the introduction of ring-fencing at the start of 2019.

The Bank of England discussed the effect of ring-fencing on mortgage lending in detail in its May 2019 Global developments and domestic financial conditions report, and it meant that by the start of 2019, the largest banks were required to keep their core UK retail banking separate from the rest of their banking activities, such as investment.

“Because UK retail banking is ring-fenced, it means there are only certain things that banks can do with the money from borrower deposits,” said UK Finance analyst, Callum Bilbe. “As deposit levels are on average higher than lending levels, these large lenders have used surplus retail deposits in the ring-fenced organisation to increase mortgage lending.

“This increase in supply of mortgages has contributed toward the average price of new mortgages dropping significantly, as larger building societies and mid-tier lenders compete with the largest banks to attract borrowers to their products.

“Overall, despite this increase in market share from the largest banks, the mortgage market has remained competitive with a variety of different types of lenders catering for all borrower needs.”

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