April mortgage lending suffers buy-to-let hangover

The UK’s mortgage industry suffered a buy-to-let hangover in April 2016, as lending dipped following a busy March.

Buyers rushed to beat the deadline for the new stamp duty surcharge on additional homes in March, leaving the market to slow down inevitably in the period following the deadline. Indeed, according to the Council of Mortgage Lenders, gross mortgage lending fell 26 per cent last month to an estimated £18.5 billion.

The latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor, echoes the findings, with house purchase approvals (seasonally adjusted) in April totalling 57,512, down 19.4 per cent from the 71,357 loans granted the previous month.

“Economic uncertainty is playing a role in this drop,” says the chartered surveyor, as property professionals become increasingly jittery ahead of the UK referendum on EU membership.

“Whichever way the result, financial markets could see rapid shifts in the days and weeks beforehand – and especially immediately afterwards,” says Richard Sexton, director of e.surv.

The market, though, is returning to normal after two months of heated activity.

“As this excitement begins to wear off, a more normalised lending climate is beginning to reassert itself,” adds Sexton. “Home lending is solid beneath this predicted surface slowdown – but now the headache is by no means over as new economic risks cause understandable caution from lenders. The third major break on mortgage lending is a deeper foreboding about the solidity of the UK economy – quite subtle but potentially more major.”

Despite all the ongoing risks, the underlying core of the lending market appears “strong enough to weather such tests”, says e.surv. Indeed, for some first-time buyers, prospects are improving and despite rising house price costs, lenders remain keen to help credit-worthy borrowers get on the property ladder: the proportion of small-deposit lending (to buyers with a deposit worth 15 per cent or less of their properties’ value) climbed in April to account for 19.1 per cent of overall house purchase loans granted – up from 17.1 per cent the previous month and 16.3 per cent in the same month of last year.

Overall lending, meanwhile, remains 16 per cent higher than April 2015, reaching the highest lending total recorded for an April since 2008, according to the CML.

David Brown, CEO of Marsh & Parsons, comments: “April lending was never going to live up to the March hype. The mortgage market was a completely different kettle of fish in the run up to 1st April, characterised by massively increased borrowing to landlords and second-home owners, eager to make Stamp Duty savings while they could. But while we’ve seen a bit of a monthly comedown since then, the annual fundamentals are indicative of strength in the mortgage market.”