First-time buyer activity soared in June, suggesting the Government’s plan to get more people on the property ladder by curbing the buy-to-let market is beginning to work.
According to UK Finance, the new trade association that has replaced the Council of Mortgage Lenders, first-time buyers borrowed £5.9 billion in June, up 26% on May and 9% compared to the same month last year.
In comparison, the buy-to-let market remains sluggish. Landlords borrowed £3billion in June, an increase of just 3% on the previous month and 3% year-on-year.
Home movers borrowed £7.8 billion, up 26% on May and 15% for the year.
Remortgage activity totalled £6 billion, up 5% by value on May and 7% on a year ago.
Paul Smee, head of mortgages at UK Finance, said: “June’s figures show a busy month in the mortgage market, with home movers having their highest monthly activity levels for over a year and an especially high number of loans for first-time buyers.
“Buy-to-let activity remains subdued compared to its 2015 peak but consistent month-to-month since stamp duty changes in April 2016.”
Buy-to-let lending has had a weak start to 2017 and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year, driven by a raft of regulation changes.
The Government increased stamp duty on second homes by 3% in April 2016 to help free up property for first-time buyers.
Furthermore, mortgage interest relief for residential buy-to-let properties has been reduced to the base income tax rate, which is 20%. Landlords were previously able to claim tax relief on the top rate of tax of up to 45%.
Smee added: “There are also signs of a softening market and we are not anticipating that this performance will be sustained in the second half of 2017. A slightly lop-sided market could well show some growth in house purchase lending but alongside reduced remortgage and buy-to-let activity.”
Adrian Anderson, director of mortgage broker Anderson Harris, said the increase in first-time activity was hugely encouraging for the overall health of the housing market.
“The drop-off in activity in buy-to-let seems to have created opportunities for those buying a home for the first time, who may previously have struggled against the purchasing power of a landlord.
“That said, buy-to-let also enjoyed a modest pick-up in June, although that was from a subdued level last year following the introduction of the stamp duty surcharge.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “This survey reinforces what we are seeing at the coalface – first-time buyers are increasingly taking advantage of a more level playing field as buy-to-let investors feel more marginalised by softening yields and capital values.”
“Nevertheless lending criteria remains tight so it only the realistic sellers who are taking advantage of this upsurge in activity.”
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