The number of mortgages taken out by landlords rose slightly in May following April’s slump, new figures show.
According to the Council of Mortgage Lenders, 16,600 loans in total were taken out by landlords in May, worth £2.6 billion. This was up 4% on April but down 4% from the previous year.
Lending fell a whopping 85% in April following the rush to beat the stamp duty deadline.
Paul Smee, director general of the CML, said: “There was a sense of the market regaining some equilibrium in May, following the stamp duty driven spike in March and the subsequent dip in April. For the second month running, first-time buyers borrowed more than home movers, the first time in 20 years that this has been the case. Buy-to-let continues at lower levels as expected, after the change to stamp duty.
“Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming. Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment.”
The data shows that 4,400 buy-to-let loans for house purchase were taken out in May, a 50% fall in activity from the previous year.
In the run-up to April’s stamp duty hike there was a boom in borrowing as buyers brought forward transactions to beat the deadline.
The 3% stamp duty increase on second homes, which came into effect on 1 April, is part of the government’s attempt to curb the buy-to-let market and free up property for first-time buyers. The basic rate of tax relief landlords can claim on properties is also set to fall to 20% from April 2017.
The CML said that first-time buyers and movers also borrowed more than in April.
First-time buyers took out £4.3 billion in loans, up 10% on April and 23% on May last year. Home movers borrowed £5.1 billion, up 19% on April but down 2% compared to a year ago.
Home-owners borrowed £9.4 billion for house purchase, up 15% month-on-month and 8% year-on-year.
Jonathan Harris, director of mortgage broker Anderson Harris, said: “The market is settling down following the stamp duty hike in April and these figures are encouraging given that they come during a time when there was much uncertainty pre-Brexit. They demonstrate that for many it is business as usual, particularly first-time buyers who are taking advantage of cheap mortgage rates, more choice at higher loan-to-values, and less competition from landlords.
“Buy-to-let is more subdued but that is entirely understandable following the spike in activity in March as investors attempted to pay less stamp duty. We expect this to pick up later in the year.
“Swap rates dropped considerably since the Referendum although they have recovered slightly on the back of Theresa May’s appointment. Lenders have been reducing mortgage rates accordingly and there is speculation that interest rates will be reduced either tomorrow or next month. There are rock-bottom fixes now available which should help boost activity in the market over coming months.”
