There was a surge in first-time buyer and home mover activity in September, although the picture for buy-to-let is looking less rosy, new figures show.
According to figures from UK Finance, 34,400 first-time buyers took out loans worth £5.7 billion last month – 14% up on the preceding month and 9% more than a year ago.
Home movers borrowed £8.4 billion, up 18% on July and 13% for the year.
Remortgaging by home owners totalled £6.4 billion, 4% down on July but 8% more than in August 2016.
In comparison, the buy-to-let market remains in the doldrums. Landlords borrowed £3.1 billion, down 3% on July 2017 and the same as in August last year.
UK Finance’s head of mortgages policy, June Deasy said: “Activity picked up in August, and recent resilience ensured that borrowing by home movers was at its highest since March 2016, when transactions were boosted by an imminent increase in stamp duty.
“Over the last 12 months, the number of people remortaging has been higher than in any period since late 2009. With mortgage rates close to historic lows and the likelihood of a rise in official rates moving closer, the popularity of remortgaging looks set to continue.”
So far this year, demand from first-time buyers and remortgagers has been driving the housing market, supported by attractive mortgage rates.
Buy-to-let lending has been weak throughout 2017 and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year following a raft of regulatino changes.
The Government increased stamp duty on second homes by 3% in April 2016 to help free up property for first-time buyers.
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%.
The change means landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
John Phillips, group operations director at Just Mortgages and Spicerhaart, said: “The picture for buy-to-let is once again a less positive one, although this was to be expected. The boost for first-time buyers is clearly a result of the collapse in buy-to-let purchases which was of course fuelled by changes in stamp duty. It is therefore no surprise that a number of lenders are continuing to relax buy-to-let criteria and expanding their loan ranges.
“While the numbers have once again decreased for buy-to-let lending, low rates and the anticipated rise in base rate nearing closer, it is likely that remortgaging will continue on an upward trend. It is likely that more and more buyers will lock into record low rates in order to manage the impact of possible rate rises and to boost their financial security.”
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