Buy-to-let sector to continue to grow, but at slower pace in 2017, says CML

The end of 2016 saw a significant increase in remortgaging, with figures hitting a seven-year high in October, according to the Council of Mortgage Lenders (CML).

The new data from the CML showed that remortgage activity for October grew by 11 per cent to £6.1 billion, up seven per cent compared to the previous year – and the highest amount since 2009.

The Council have also predicted that borrowing in the buy-to-let sector would continue well into the new year, but in lower volumes due to the ever-increasing taxation and legislation in the sector.

This was evident in the figures with landlord borrowing rising by just seven per cent to £3 billion in October, compared to a 21 per cent rise recorded during the same period just a year earlier.

Paul Smee, Director General of the CML, said: “Buy-to-let house purchase lending remains weak following the change to stamp duty on second properties in April.

“With lenders now tightening affordability criteria ahead of the Prudential Regulation Authority’s stress tests and the forthcoming tax relief changes next year, these lower volumes are likely to be the new normal.”

In comparison, regular mortgage lending figures revealed an 11 per cent slow down on last year, with homeowners borrowing £10.5 billion for house purchases, a drop of around eight per cent for the month.

Monthly lending to first-time buyers also dropped by eight per cent to £4.5 billion, equating to just 28,900 loans, as buyers struggle to save the necessary deposits, despite the various schemes offered by the government.

Peter Williams, Executive Director of IMLA (Intermediary Mortgage Lenders Association), said: “October’s lending figures are indicative of a market that is still finding its feet after a tumultuous year.

“It has had to cope with significant changes to Stamp Duty along with the ongoing ramifications of Brexit. Considering all that it has had to contend with, the market has proven itself to be remarkably robust, with lending figures roughly the same as they were at the beginning of the year.

“The remortgage market has taken off this year with the total value of such loans now at their highest rate since the beginning of 2009, as consumers continue to take advantage of the historically low interest rates. However, with swap rates rising, now is probably a good time to remortgage as the best deals might not be around for too much longer.

“The strong remortgage figures will come as no surprise to IMLA’s members, who earlier this year predicted that the remortgage market had the best prospects for growth.

“The buy-to-let market has clearly been badly affected by the raft of changes that have been made this year. Changes which may yet have unintended consequences. With a slow-down in buy-to-let lending, it is likely that the supply of high quality housing in the private rented sector could suffer.”

LINK: CML Report