March saw unprecedented lending levels in UK due to buy to let rush
Mon 16 May 2016
Tuesday, 17 May 2016 Home owner house purchase lending was up by 60% year on year in the UK in March butthe overall lending figures were affected by a rush from buy to let buyers seeking to beat a new stamp dutysurcharge. Overall on an unadjusted basis, home owners borrowed 13.8 billion and first time buyers borrowed4.5 billion, up 32% on February and 29% on March last year, according to the latest figures from the Council ofMortgage Lenders.
Home movers borrowed 9.3 billion, up 75% on February and 82% compared to a year agowhile remortgage activity totalled 4.7 billion, down 2% on February but up 7% compared to a year ago. Landlordsborrowed 7.1 billion, up 87% month on month and 163% year on year but CML director general Paul Smeepointed out that activity was distorted in March due to a rush to beat the introduction of changes to stamp duty onsecond properties in April, alongside the seasonal uptick in activity before Easter.While the increases aresubstantial, these supercharged levels of activity are likely to be temporary and will fall back over the summermonths,' he added.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA),suggested that while activity has picked up among home movers, the leap in landlord lending makes it clear thatprice inflation has been fuelled by the Government's stamp duty changes for buy to let properties and secondhomes, incentivising many buyers to bring their purchases forward where possible.A policy move that aims tomanage long term demand has therefore created short term tremors in the market and made it hard to predicthow things will look when the dust settles.
The Government's hope is that first time buyers will find their prospectsimproved and lenders are certainly doing their bit with first time buyer lending up 29% year on year,' heexplained.Continuing access to high loan to value (LTV) mortgages is an important part of this equation, andshould not be frowned upon given the rigorous affordability checks in place,' he pointed out.Nevertheless, the UKneeds a balanced housing market to prosper and playing politics across tenures cannot compensate for theunderlying short supply of property.
Added uncertainty from the upcoming EU referendum vote means the marketis in urgent need of time and space to draw breath. Now is not the time to consider further tinkering under thebonnet after a rollercoaster start to the year,' he added.According to David Whittaker, managing director ofMortgages for Business, it wasn't just March which was exceptional. The first quarter as a whole was strong aslandlords reacted to tax changes.
The dust will begin to settle in this part of the mortgage market through thesecond quarter of the year,' he said.Landlords have a new status quo and it's not just the additional stamp dutythat needs to be factored into their financial planning as investment strategies will also have to take into accountupcoming tax relief restrictions plus increased income cover ratios from many lenders,' he added.
David Brown,chief executive officer of Marsh & Parsons, said that while the March mortgage market was unprecedented interms of the level of lending to landlords, it was only ever going to be a short term phenomenon.With newparameters in place, there is now a sense of business resuming as usual. Encouragingly, strong growth elsewherein the mortgage market means we're unlikely to see any severe withdrawal symptoms from a buy-to-let lull in theaftermath of this whirlwind,' he added.