The latest Mortgages for Business report shows that despite remortgaging activity still being most prominent in the buy-to-let market, purchase lending returned to higher levels in the final quarter of 2016.
Buy-to-let
Standard buy-to-let (vanilla) transactions increased from 28% in Q3 to 38% in Q4. In addition, lending for HMO properties rose to 26%. Despite this being below the level seen in Q2 2016, this sees the market return to levels seen before the changes to landlords’ tax relief in 2015.
David Whittaker, CEO of Mortgages for Business said: ‘It is encouraging to see that the share of lending for purchase in the buy to let mortgage market returned to normal in Q4 2016. Following a notable shift towards lending for remortgage in the third quarter, landlords showed they were once again willing to commit to new purchases. The outcome of the EU Referendum, and the subsequent macro-economic uncertainty dampened purchase lending in Q3, with many landlords initially opting for a cautious approach.’[1]
‘While changes to Stamp Duty on second properties and landlords’ tax relief mean that landlords need to approach their investments intelligently, there are still excellent returns to be had in the market – especially compared to other asset classes,’ he continued.[1]
Buy-to-let lending levels after remortgaging surge
Loan to Values
In addition, data from the report shows that the average loan to value (LTV) ratios for all products stayed fairly constant at 67% in Q4 of 2016.
Interestingly, there was a substantial upturn in both the values and loan size for the multi-block unit mortgage market. This was due to the rise in the number of mortgages being taken out on high-value multi-unit properties. 30% of these transactions in the period were for properties valued over £1m.
Concluding, Whittaker said: ‘There is clearly an appetite among investors for more valuable multi-unit blocks, with the lending share of million-pound plus blocks from growing under a fifth in Q3 to almost a third in Q4.’[1]
[1] http://www.propertyreporter.co.uk/landlords/btl-market-settles-after-remortgage-rush.html