Home owner house purchase lending was up by 60% year on year in the UK in March but the overall lending figures were affected by a rush from buy to let buyers seeking to beat a new stamp duty surcharge. Overall on an unadjusted basis, home owners borrowed 13.8 billion and first time buyers borrowed 4.5 billion, up 32% on February and 29% on March last year, according to the latest figures from the Council of Mortgage Lenders.
Home movers borrowed 9.3 billion, up 75% on February and 82% compared to a year ago while remortgage activity totalled 4.7 billion, down 2% on February but up 7% compared to a year ago. Landlords borrowed 7.1 billion, up 87% month on month and 163% year on year but CML director general Paul Smee pointed out that activity was distorted in March due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter.While the increases are substantial, these supercharged levels of activity are likely to be temporary and will fall back over the summer months,’ 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 that price inflation has been fuelled by the Government’s stamp duty changes for buy to let properties and second homes, incentivising many buyers to bring their purchases forward where possible.A policy move that aims to manage long term demand has therefore created short term tremors in the market and made it hard to predict how things will look when the dust settles.
The Government’s hope is that first time buyers will find their prospects improved and lenders are certainly doing their bit with first time buyer lending up 29% year on year,’ he explained. Continuing access to high loan to value (LTV) mortgages is an important part of this equation, and should 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 the underlying short supply of property.
Added uncertainty from the upcoming EU referendum vote means the market is in urgent need of time and space to draw breath. Now is not the time to consider further tinkering under the bonnet after a roller coaster start to the year,’ he added. According to David Whittaker, managing director of Mortgages for Business, it wasn’t just March which was exceptional. The first quarter as a whole was strong as landlords reacted to tax changes.
The dust will begin to settle in this part of the mortgage market through the second quarter of the year,’ he said.Landlords have a new status quo and it’s not just the additional stamp duty that needs to be factored into their financial planning as investment strategies will also have to take into account upcoming 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 in terms of the level of lending to landlords, it was only ever going to be a short term phenomenon.With new parameters in place, there is now a sense of business resuming as usual. Encouragingly, strong growth else wherein the mortgage market means we’re unlikely to see any severe withdrawal symptoms from a buy-to-let lull in the aftermath of this whirlwind,’ he added.
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