Buy-to-let lending dips, as first-time buyers hold up UK market

Buy-to-let lending has dipped in the UK, as the private rented sector faces a growing number of headwinds. Government measures such as mortgage interest tax relief reduction and a stamp duty surcharge have left landlords facing rising costs in the coming year, which has impacted the sector’s appeal to investors.

However, weakness in buy-to-let lending has been offset by an increase in first-time buyers and remortgaging, says Council of Mortgage Lenders senior economist Mohammad Jamei.

“Overall mortgage lending continues to hold up pretty well, but we seem to have a twin-track market,” he comments. “A continuing acute shortage of homes being offered for sale is one aspect of a broken housing market, that looks unlikely to resolve in the near term.”

The CML estimates that gross mortgage lending reached £18.9 billion in January. This is 6 per cent lower than December’s lending total of £20 billion, but 2 per cent higher than the £18.6 billion lent in January last year. This is the highest lending total for a January since 2008 (£25.2 billion).

 

Buy-to-let lending dips despite resilient mortgage market

17th February 2017

Buy-to-let lending dipped in 2016, despite the UK’s broadly resilient mortgage market.

Home buyers borrowed £127.7bn in 2016, up 7 per cent on 2015, according to the Council of Mortgage Lenders. This came to 698,900 loans, up 3 per cent on 2015.

First-time buyers, meanwhile, borrowed £53.2bn for home-owner house purchase in 2016, up 13 per cent on 2015 – more than any other year since the CML records began in 1974.

Paul Smee, director general of the CML, comments: “2016 could have been a potentially destabilising year of regulatory and political change, but the mortgage market has been resilient and adaptable.”

The buy-to-let sector’s positive lending performance, however, has been driven primarily by remortgaging, as the sector’s appeal has been impacted by a string of government measures introduced in the last year.

Gross buy-to-let saw month-on-month decreases in December 2016, down 15 per cent by volume and 7 per cent by value, according to the CML. Compared to December 2015, the number of loans decreased 21 per cent and the value of these loans decreased 18 per cent.

In the final quarter of the year, gross buy-to-let lending decreased to £6bn, down 2 per cent on the previous quarter and 3 per cent on the same quarter in 2015. This totalled 57,400 loans, up 2 per cent quarter-on-quarter but down 20 per cent year-on-year.

Steve Bolton, Founder of Platinum Property Partners, comments: “The UK mortgage market was remarkably resilient in 2016, despite the regulatory and political changes the year threw at it. However, although first-time buyer and homeowner markets escaped unscathed, the buy-to-let (BTL) sector has suffered a serious blow. Despite lending being propped up by remortgage activity – with investors able to make significant savings thanks to record low mortgage rates – BTL purchase lending has failed to recover to the levels seen before stamp duty changes were enforced.”

“It’s time the Government realises that the long-term impact of its systematic punishment of landlords will be to drive down not only BTL lending but first-time buyer lending as well,” he adds. “The Spring Budget may well be the last chance for Government to abolish this absurd Tenant Tax before it is too late.”

 

UK lending reaches eight-year high

26th January 2017

UK lending reached a eight-year high in 2016, new figures reveal.

The final data from the Council of Mortgage Lenders for last year estimate that gross mortgage lending dropped 4 per cent both month-on-month and year-on-year to reach £20.4 billion in December. Nonetheless, the month’s lending was enough to bring the total for the year to an estimated £246 billion, up 12 per cent on 2015 and the highest annual figure recorded since 2008.

That leaves mortgage lending in the fourth quarter of 2016 just £0.2 billion below the £62 billion lent in the same period of 2015 – a positive note after 12 months in which the UK economy faced headwinds of uncertainty due to June’s EU referendum.

The CML acknowledges that uncertainty will continue to weigh on prospects for the year ahead, but is broadly upbeat about the coming months in 2017.

“Approvals for house purchase have recovered strongly of late, and this should feed through to lending figures in the early months of 2017,” says CML senior economist Mohammad Jamei. “The current availability of mortgage credit is benign, and the real issue continues to be a dearth of properties on the market, which adds to the challenges facing would-be buyers.”

 

Mortgage lending points to stable UK market

17th January 2016

Lending rose at the end of 2016 in the UK, as the housing market remained stable and resilient.

Home-owners borrowed £11 billion for house purchase, according to the Council of Mortgage Lenders, up 5 per cent month-on-month and 2 per cent year-on-year. The number of loans taken out also climbed 5 per cent month-on-month to 60,800 and up 0.2 per cent year-on-year. They took out 60,800 loans, up 5% on October and up 0.2% on

First-time buyers borrowed £4.7 billion, up 4 per cent on October and 9 per cent on November last year. This equated to 30,100 loans, up 5 per cent month-on-month and 8 per cent year-on-year.

“November lending reflected stable market conditions,” comments Paul Smee, director general of the CML. “Overall, 2016 did not match recent years in terms of house purchase lending growth, but lending remained resilient through regulatory and political change and aspirations for home-ownership remain strong in the UK. Our forecasts for 2017 may be less bullish than a year ago, as economic uncertainty weighs on the market, but we still predict 1.2m transactions and a slight increase in gross lending to £248bn.”

Buy-to-let lending, driven by remortgage activity, saw its strongest monthly lending level since the stamp duty changes on second properties introduced last April, with landlords borrowing £3.2 billion, up 10 per cent month-on-month and down 9 per cent year-on-year.

“Despite this, we expect buy-to-let lending levels in both 2016 and 2017 to prove lower than their 2015 recent peak as further tax changes take effect,” adds Smee.

The figures following the CML’s forecast for 2017, which predicts that gross lending is likely to hover around the £250 billion mark in 2016, 2017 and 2018.

 

Mortgage market remains resilient for 2017
11th January 2017

The UK mortgage market remains “resilient” at the start of 2017, according to lenders.

Gross lending is likely to hover around the £250 billion mark in 2016, 2017 and 2018, according to the Council of Mortgage Lenders. While this is a downward revision of previous forecasts, reflecting economic uncertainties as well as new tax burdens and regulatory changes in the housing and mortgage markets, the CML expects the market will plateau rather than decrease.

The forecast for the year arrives after gross lending grew 3 per cent in November 2016 to £21 billion.

“Property transactions look set to drift down slightly, although we do not expect house prices to fall, and net lending seems unlikely to get above £30 billion next year,” says CML director general Paul Smee.

“The housing market is relatively well insulated from direct Brexit effects as most activity is driven domestically, but it is not immune from more generalised economic uncertainty. And we expect any modest strengthening in home-owner lending to be rather offset by a less active house purchase market in buy-to-let, as both tax and regulatory changes bite on landlords.”

 

Remortgaging rises as buy-to-let valuations dip

8th December 2016

Remortgaging is rising in the UK, as homeowners race to lock in deals before rates begin to climb again.

New figures from Connells Survey & Valuation shows that remortgage activity rose 4.9 per cent in November, compared to October, and surged 24.6 per cent, compared to the same month in 2015.

“There’s no doubt that remortgaging is driving the mortgage market at the moment,” says John Bagshaw, corporate services director of Connells Survey & Valuation.

Indeed, on a seasonally adjusted basis, overall valuation activity was virtually static in November, as the number of valuations fell marginally, down 0.1 per cent on October. There was, however, a 6.6 per cent increase in the number of valuations undertaken compared to November 2015.

The number of valuations carried out for the buy-to-let sector fell 6.1 per cent month-on-month and 18.5 per cent on a 12-month basis, reflecting the headwinds that have been facing landlords through the year. Indeed, at the end of last year, the government announced that it would soon begin phasing out mortgage interest tax relief, forcing landlords to pay tax on revenue rather than profit, while April 2016 saw the introduction of a 3 per cent stamp duty surcharge for buy-to-let purchases.

“2016 has been something of an annus horribilis for landlords,” says Bagshaw. “hey have had to contend with the reverberations of the 3 per cent stamp duty surcharge and the removal of 10 per cent ‘wear and tear’ allowance. Fortunately, June through to October were all relatively good months for BTL remortgages, with activity rising on a seasonally adjusted basis.”

However, the Autumn Statement this month saw the Chancellor announce that he would ban fees for letting agents to tenants, which is expected to see some additional costs passed on to landlords, which Bagshaw notes “[appears] to have unsettled the market again”.

Nonetheless, new research this week found that landlords are starting to feel more confident about 2017, as they begin to take steps to offset the additional costs, from raising rents to incorporating and operating as a limited company.

 

Remortgaging rises as rates stay low

9th November 2016

Remortgaging is rising in the UK this autumn, as borrowers take advantage of record low rates.

The number of remortgage valuations surged 16.8 per cent year-on-year in October, according to research from Connells Survey and Valuation, as homeowners locked into attractive deals.

John Bagshaw, corporate services director of Connells Survey & Valuation, comments: “Spurred on by competitive deals and record low rates, remortgagers have been one of the most active segments of the market. As rates have fallen over the last 12 months, savvy homeowners have been taking full advantage of the benign borrowing environment and competition between lenders – borrowers can afford to be more selective than they could twelve months ago. Homeowners on expensive standard variable rate mortgages are making big savings moving onto the best fixed and discounted rate mortgages around.”

The volume of valuations undertaken on behalf of first-time buyers also increased significantly, up 15.4 per cent compared to October 2015.

 

Interest rate cut to boost rise of remortgagers

5th August 2016

The housing market has shifted in favour of remortgagors post-Brexit, with the Bank of England interest rate cut set to accelerate their rise.

June’s monthly tracker from LMS found that remortgagers were already on the rise, with 32,873 remortgage loans taken out across the month, a rise of 6 per cent from May and 1 per cent from June last year. Each month of 2016 saw annual increases in the value of remortgage lending, although June bucked the trend, with remortgaging falling slightly from £5.3bn in June 2015 to £5.1bn, a drop of 3 per cent.

Andy Knee, Chief Executive of LMS says: “We witnessed a strong start to the year with remortgage lending up year-on-year each month in 2016, when in a safer, surer climate, homeowners had rushed to remortgage in a desire to lock in to better rates before a possible rate rise. But activity in June has slowed with the value of remortgage lending down as indecision increased in the lead up to, and following, the referendum.”

“While we’ll only begin to see the referendum result’s real impact from July’s figures onwards, it is very likely the small drop occurred as people took pause amid Brexit uncertainty before making any decisions.”

In the first full month since the vote to leave the European Union, meanwhile, research from Connells Survey and Valuation shows that while the number of all property valuations fell 2 per cent compared to the same month last year, activity in the first-time buyer and remortgaging sectors are driving the market. There were 12 per cent more first-time buyer valuations in July 2016 than in July 2015. Meanwhile, remortgaging activity also saw the same annual rate of growth.

John Bagshaw, corporate services director of Connells Survey & Valuation, comments: “Judging the Brexit effect might take years – but in the meantime the first full month after the vote already looks encouraging.

“July was particularly good for those making their first step on the property ladder… First-time buyers are continuing to make the most of government schemes and are now boosted by even lower mortgage rates this summer. This is the same development that is proving a boost for remortgagors, also benefitting from a new wave of even better mortgage deals.”

This week, the Bank of England cut interest rates to a record low of 0.25 per cent. With a £100 billion fund also ensuring that banks pass on the savings to consumers, mortgage rates may lower further, but will certainly stay low for some time, something that will likely fuel further remortgaging activity.

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