Buy-to-let deadlines fuel February lending

Buy-to-let deadlines fuel February lending

The latest Mortgage Monitor from e.surv, has shown how the ticking clock of legislation powered lending in February with a further buy-to-let burst.

Overall house purchase approvals (seasonally adjusted) in February totalled 72,799, forming the second highest total since January 2014, which saw 75,691 loan approvals. February’s total also easily beat the average 71,173 approvals seen across the previous six months, in spite of a monthly 2.4% drop from 74,581 granted in January 2016.

Fuelling this strong borrowing trend is not only April’s stamp duty hike but also the EU mortgage credit directive which will come into force by the end of March – set to bring new parameters for buy-to-let borrowing. Among these will be tougher mortgage application rules, a more arduous application process and harsher means testing for consumer landlords.

House purchase lending has risen 17.4% annually from 62,007 loans granted in February 2015, following the consistently high annual increases seen across the previous six month period. Behind these increases, first-time buyer momentum is also having an impact, with strong small-deposit lending throughout the opening months of 2016.

Richard Sexton, director of e.surv chartered surveyors, comments: “The clock is ticking for buy-to-let investors. Over the next couple of months, stamp duty and the MCD could both make their mark. February lending reflected this powering last month’s overall strong performance – for both buy-to-let and first-timers.
For buy-to-let investors, the race really has been  on to beat both pieces of legislation. Some concerns  about these changes are overly pessimistic. Before the implementation of last year’s new MMR rules, uncertainty was rife among both borrowers and lenders but the reality wasn’t as dramatic as predicted by many. MMR  actually brought in positive changes for the industry and further regulation has the potential to do the same.

For first-time buyers too, February has been a promising month. With both the proportion of small-deposit lending, and the actual number of loans granted rising, first-timers are taking advantage of some of the great deals on offer and the extra government support available, including Help to Buy ISAs. However, there’s work to be done to make sure that the current momentum in first-time buyer lending doesn’t wane as we get further through the year.”

Small-deposit lending leaps in February

February saw a numerical increase in small-deposit lending (to buyers with a deposit worth 15% or less of their properties’ total value), with 11,429 of such loans granted approval, 5.7% higher compared to 10,814 the month before – and 9.1% up on 10,479 a year ago.

Alongside this absolute terms increase, the proportion of small-deposit lending also increased, as small-deposit borrowing accounted for 15.7% of overall house purchase loans granted – up from 14.5% the previous month. However, this proportion continues to lag behind the 16.3% seen across the last couple of months of 2015, as a proportional rise in buy-to-let lending makes its mark.

Although small-deposit borrowing rose in February, completed first-time buyer sales fell 4.8% month-on-month, the latest First Time Buyer Barometer from Your Move and Reeds Rains revealed, to 27,900 purchases in January. December in contrast saw 29,300 first-timer transactions. This slowdown in sales comes largely as a result of ongoing supply issues and rising deposit costs and house prices but in spite of these, annually house purchase lending rose 38.8% compared to January 2015.

Richard Sexton, a director of e.surv chartered surveyors, comments: “First-time buyers look set to enjoy an early spring, with small-deposit lending bouncing back from a January dip. The proportion of small-deposit lending has risen this month, as have the number of loans granted. This is great news but also raises some serious questions of the housing market. Demand is sustained and there do not appear any factors on the horizon that may diminish it.

Building new homes is one answer, but it can’t solve the UK’s supply issues on its own. Things need to get moving again – the rhythm of moving and selling, upsizing and downsizing needs to be maintained, and encouraged. There’s a danger that legislative changes, such as stamp duty, are potentially putting people off and slowing down property movements. With fewer homes on the market, it’s not necessarily an easy road ahead but lending levels are encouraging. Lenders are doing their bit to support first-timers and now is the time for action to confront the supply side.”

Regional snapshot: Northern Ireland jumps ahead with more small-deposit lending

Northern Ireland jumped ahead of the rest of the UK in terms of the proportion of small-deposit lending in February– which stood at 29% for the month. This was up 7 percentage points from the 22% that small-deposit borrowing represented in January – and a move upwards from it’s third place standing the previous month. Across the rest of the UK, it was a mixed picture, with most regions seeing the same 1 percentage point rise as the UK average – which climbed from 15% to 16% across January and February.

Southern regions appear to be struggling to make progress and increase small-deposit lending proportions. Eastern England saw just a 1 percentage point rise in February, from 13% up to 14%. Likewise, just 13% of overall house purchase lending in the South and South Wales was to small-deposit borrowers – rising 1 percentage point from January. London was the only region across the UK where proportional small-deposit lending remained static, while the Midlands and the Northwest saw falls of 1 percentage point.

Join our mailing list:

Leave a comment

Latest Comments

Northerner 20 Oct 2016

Any views from outside the M25? No wonder politicians can't get the housing big picture when everyone seems to think that London is the yard stick, when it absolutely is not.

view article
Sean Lees
Sean Lees 13 Oct 2016

I think that the pest control really depends on the situation. If the tenant moved in and found an infestation that needs pest treatment service, I think it's more reasonable that the landlord should pay...

view article
Kevin 13 Oct 2016

Please Sian Berry Dan Wilson Craw LANDLORDS DO NOT WANT TO RAISE RENTS They are being forced to because of Section 24! An unfair, punitive tax hike that will be a disaster Green Party, Generstion...

view article
Fletcher88 11 Oct 2016

Absolutely agree! Moreover property prices edged up with 0.7% this month as the market recovered from the initial Brexit hit

view article
Gary Das
Gary Das 06 Oct 2016

A lot of lenders (especially the high-street banks and lenders people approach first) could do more to accommodate for the self-employed. It can really be a struggle, as I found out myself last year when...

view article
richardrawlings 04 Oct 2016

Not sure I understand this! If Basildon and Hemel rose 68% and 52% respectively, why do they not appear in the top ten list, which appears only to feature those in the minus 20's!! Is it me?

view article
luxus 27 Sep 2016

It can be stressful. More clarity is needed on the process, from a customer perspective and consideration should be given to using the Scandinavian model where the sales process is much quicker.

view article
Melissa_Green 26 Sep 2016

Green belts are normally designated around capitals and other major cities and conurbations and their aim is to prevent urban sprawl by keeping land permanently open. The essential characteristics of green...

view article
Jimmy_McCoy 16 Sep 2016

I think that the main reason to buy garden purchases in last minute is because people always search for the best deal. In summer months there are abundance of seasonal goods and it means more low cost

view article
Jimmy_McCoy 16 Sep 2016

Buying a home often is more expensive than you expect. There are lots of hidden costs such as: stamp duty, surveys and valuations, mortgages etc. that can add more than 10% to the total bill

view article
Homebuyerconveyancing 15 Sep 2016

We are seeing a massive influx of Homebuyers using online Estate Agents. The winners are the online portals that still aim to manage the customer journey to homeownership. They provide a valuation service,...

view article
oliviaG 12 Sep 2016

Without a doubt renovating can truly be very beneficial to many homeowners but it depends to a great extent on the condition of your home and the parts of it you want to refresh. Before you start you should...

view article

Related stories

More articles from Finance

Buy-to-Let Roadshow 2016

21st-24th November

4 days
7 specialists
4 locations
Free to attend

Click here to register now