Activity in the buy-to-let mortgage sector is expected to drop sharply in the coming months, according to a survey by the Bank of England (BoE).
The BoE’s Credit Conditions Survey, which records the predictions of UK banks and building societies, found that lending to owner-occupiers is likely to increase significantly in the second quarter (Q2) of this year, but the opposite will happen for buy-to-let landlords.
The survey’s results arrive as the Council of Mortgage Lenders (CML) reports that £3.7 billion was lent to landlords in February, a huge 61% rise on the same month last year.
The CML claims there were 48,000 loans approved for house purchase in February – consisting of 22,000 loans for first time buyers and 26,000 for home movers. It also found there were 10,300 buy-to-let loans for house purchase.
Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply
All of these figures are up on the previous month and significantly higher than the previous year, with 11.1% more loans to first time buyers and 13.5% more for home movers.
The Director General of the CML, Paul Smee, comments: “Activity has been boosted by landlords seeking to complete purchases before tax changes in April. We do not expect activity to show such strong year-on-year growth later in the year.”1
However, some analysts believe that there may be too much pessimism regarding the sector.
The Director of mortgage broker Anderson Harris, Jonathan Harris, says: “Buy-to-let goes from strength to strength, but of course, figures will be skewed by landlords bringing forward purchases to beat the Stamp Duty deadline.
“It is highly likely that purchase numbers will slip, although we expect remortgaging to continue to thrive, as landlords squeeze every penny out of investments to help cover other tax changes, such as the reduction in mortgage interest tax relief.”1
Despite the forthcoming changes, Paul Mahoney, a finance expert at Nova Financial, insists that “buy-to-let is not dead”, and explains how the changes will affect you: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/
Yesterday, we reported that the number of people showing interest in buy-to-let property fell by over a quarter in March compared with the previous month.
New data from e.surv also suggests that mortgage lending dipped over the past month, as buy-to-let activity eased. However, it was still the strongest Q1 for mortgage approvals since 2007.
The firm estimates that there were 67,173 house purchase loan approvals in March, down by 9.1% on February. It believes that first time buyer mortgages accounted for 11,487 of these loans.
For the first three months of the year, e.surv calculates a total of 210,468 house purchase loan approvals, up 13.5% on Q1 2015.
1 https://www.lettingagenttoday.co.uk/breaking-news/2016/4/the-surge-is-over-bank-of-england-says-buy-to-let-lending-about-to-plummet