April mortgage lending suffers buy-to-let hangover
Thu 19 May 2016
The UK's mortgage industry suffered a buy-to-let hangover in April 2016, as lending dipped following a busyMarch. 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 Councilof Mortgage Lenders, gross mortgage lending fell 26 per cent last month to an estimated 18.5 billion.The latestMortgage Monitor from e.surv, the UK's largest chartered surveyor, echoes the findings, with house purchaseapprovals (seasonally adjusted) in April totalling 57,512, down 19.4 per cent from the 71,357 loans granted theprevious month."Economic uncertainty is playing a role in this drop," says the chartered surveyor, as propertyprofessionals become increasingly jittery ahead of the UK referendum on EU membership."Whichever way theresult, financial markets could see rapid shifts in the days and weeks beforehand and especially immediatelyafterwards," says Richard Sexton, director of e.surv.
The market, though, is returning to normal after two monthsof heated activity."As this excitement begins to wear off, a more normalised lending climate is beginning toreassert itself," adds Sexton. "Home lending is solid beneath this predicted surface slowdown but now theheadache is by no means over as new economic risks cause understandable caution from lenders. The thirdmajor break on mortgage lending is a deeper foreboding about the solidity of the UK economy quite subtle butpotentially more major."
Despite all the ongoing risks, the underlying core of the lending market appears "strongenough to weather such tests", says e.surv. Indeed, for some first-time buyers, prospects are improving anddespite 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 percent the previous month and 16.3 per cent in the same month of last year.Overall lending, meanwhile, remains16 per cent higher than April 2015, reaching the highest lending total recorded for an April since 2008, accordingto the CML.
David Brown, CEO of Marsh & Parsons, comments: "April lending was never going to live up to theMarch 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 StampDuty savings while they could. But while we've seen a bit of a monthly comedown since then, the annualfundamentals are indicative of strength in the mortgage market."