Buy-to-let
New figures from the Bank of England have revealed that UK mortgage lending fell significantly in April following the rise in stamp duty on buy-to-let properties and second homes.
The Bank’s Money and Credit report showed that mortgage lending rose just £281 million in April, the lowest level since the eurozone crisis in 2012.
This is down from £7.4 billion the previous month and far lower than many economists had forecast.
The number of mortgage approvals fell from 70,305 in March to 66,250 in April.
Remortgaging approval numbers hit 40,510, broadly in line with the average over the previous six months.
The figures come after the government’s 3% stamp duty increase was introduced in April in a bid to curb the buy-to-let market and free up property for first-time buyers.
In the run up to the stamp duty hike there was a boom in borrowing as buyers brought forward transactions to beat the deadline.
Richard Pike, Phoebus Software sales and marketing director, said: “We are but a couple of weeks away from the EU referendum, which is more than likely to have an effect on the economy one way or the other, and conceivably for some time after. Lenders, with targets to meet, are currently offering some of the best deals we’ve ever seen which continues to attract, especially in the remortgage market.
“However, as house prices continue to rise lenders are also beginning to look closely again at affordability and income multiples. This could well have an impact in areas where house prices are outstripping wages growth. It is undoubtedly a worrying time for the market, but low interest rates and flexible products I think will play a large part in attracting potential borrowers and hopefully ensuring the market doesn’t drop to previous levels.”
Richard Sexton, director of chartered surveyor e.surv, said:“ This natural slowdown follows the flurry in buy-to-let activity following April’s stamp duty deadline, but June’s referendum could also be causing temporary caution. Remortgaging remains strong however, with lenders offering a variety of new and increasingly flexible mortgage rates for existing homeowners. And it’s not just the remortgaging sector with a spring in its step. Overall house purchase approvals may be down, but first-time buyers are still very much in the game.
“An increase in available mortgage deals is playing into the hands of first-timers too, providing further choices and even inter-generational solutions. House prices continue to increase, but financial factors – particularly low inflation and rising wages – are helping first timers step onto the property ladder. Both factors have helped savings and with government schemes such as the Lifetime ISA leading the way, there’s nothing to suggest first-time buyer lending won’t go from strength-to-strength as we approach the second half of the year.”
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