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

milessgabriel
milessgabriel 05 Dec 2016

Useful article

view article
Spencer Fortag
Spencer Fortag 30 Nov 2016

I am glad that someone listened to me!

view article
Tony Gimple
Tony Gimple 27 Nov 2016

It's not just the lack of estate agency advice that's costing landlords money; most are getting seriously bad advice from their accountants resulting in tax bills far higher than they need to be. Likewise,...

view article
Sally Walmsley
Sally Walmsley 18 Nov 2016

The RLA stands by its sell-off statistics. While we welcome the feedback from Mr Jagota and are delighted to hear how well things are going for landlords in the north east, we would like to make it clear...

view article
Sheryl87
Sheryl87 18 Nov 2016

The high employment levels and the vibrant economy has led to ever-increasing demand for rental properties, especially from professionals relocations from other cities. This has led to more experts teaming...

view article
Sheryl87
Sheryl87 18 Nov 2016

Renting out your house can be risky business. It's good to think about residential landlords insurance. Standard cover includes buildings cover and cover for loss of rent following damage to a property...

view article
AmberMorris
AmberMorris 09 Nov 2016

Fear of ghosts, really?? Ok, I get the fear of bats in the attic and mice and rats running under your nose - those are easy to deal with pest issues which are really unpleasant and can turn you off. But...

view article
AmberMorris
AmberMorris 08 Nov 2016

In my experience, It has always been a matter of discussion between the landlord and the tenant. There are cases when it's clear who's responsible for the pest control costs. I see a lot of people in forums...

view article
warren
warren 08 Nov 2016

There you go buddy :)

view article
Agent_PeeBee
Agent_PeeBee 07 Nov 2016

Any reason why my comment to this 'article' has not been published?

view article
Sean Lees
Sean Lees 04 Nov 2016

I don't think anyone can say dogs or cats are better or worse; depends on the animal, its age, how long it's left inside, etc. How bad the mess is depends somewhat on whether you are renting furniture...

view article
daniel black
daniel black 25 Oct 2016

I've been keeping a close eye on what the effect of Brexit has been on the rental market and it's a very mixed bag. Whilst the majority of the news focuses on London's market. I think this time next year...

view article

Related stories

More articles from Finance

Specialist Lending Roadshow 2017

24th-27th November

4 days
7 specialists
4 locations
Free to attend

Click here to register now