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.

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Latest Comments

SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

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Bertrand
Bertrand 02 Jun 2017

How about the Welsh Govt introducing a scheme to protect landlords against "rogue" tenants who are then taken to court for criminal damage to the properties they trash. Pretty unlikely I suspect and politically...

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AmberMorris
AmberMorris 25 May 2017

"Please don't pick a novelty tune-playing doorbell. They're not 'fun'. They're stupid." Laughed a lot to this. It's actually true, though.

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Oliver Conway
Oliver Conway 18 May 2017

Making a neat inventory is a good idea, but if the seller is not willing to provide it, can the buyer demand it?

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Bertrand
Bertrand 17 May 2017

First step to nationalisation of the private rented sector IMHO. Nanny state poking their noses into things yet again. I object, as a decent landlord, sometimes having to deal with some pretty awful tenants,...

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Izzy
Izzy 16 May 2017

This is such a great a post. I love the detail you've gone into. It's a very useful article for helping those who are looking at deciding which sector they would like to go into! When I first started investing...

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paul burnham
paul burnham 30 Apr 2017

Jeremy Corbyn's pledge that a Labour government would build 500,000 new council houses must electrify the general election campaign. Reliance on markets and the profit motive has brought huge housing-related...

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CommercialTrust
CommercialTrust 28 Apr 2017

Sadiq Khan?s announcement of an online database of landlords and letting agents who have been convicted of housing offences, appears on face value to be a variation of the already implemented Database

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warren
warren 26 Apr 2017

You're very welcome Mary! Glad you enjoyed them :)

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Mary Ward
Mary Ward 26 Apr 2017

Thank you for the wonderful ideas. First impressions can make or break a deal. It's sadly that many homeowners drop the kerb to create an off-street parking space.

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Tony Gimple
Tony Gimple 14 Apr 2017

I'm not at all surprised that so many landlords are still confused about what the tax changes really mean and how it will affect them. In particular, the blind rush to incorporation is leaving landlords...

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MH
MH 13 Apr 2017

You are right that the bank holidays are going to be spoiled in looking for the properties. But people who want to sell their property and looking for the better relocation, they can get benefits of this...

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