The forthcoming stamp duty changes have been the catalyst behind buy-to-let approvals soaring in January.
Figures from research conducted by esurv shows that in January, there were 85,432 house purchase approvals. This represented a rise of 20.6% month-on-month. In addition, this was the highest number of monthly house purchase approvals since October 2007, when 87,594 were recorded.
Annually, house purchase lending has risen by 39.3%.
‘Buy-to-let approvals contributed to the growth in January home lending,’ noted Richard Sexton, director of e.surv charterted surveyors. ‘Concerns about the sector’s growth have sparked a wave of legislation but as stamp duty changes come into effect this April, there’s been a rush to get buy-to-let loans approved. Many have predicted a narrowing of the buy-to-let sector but actually what we’re seeing in lending quarters appears to be the opposite.’
‘This buy-to-let rise also hasn’t been at the expense of first-time buyers. The number of small-deposit loans granted has risen in January and this is a great sign that lenders still have the appetite to give first-timers a chance. Rising wages and a delayed interest rate rise have also boosted first-timer’s prospects. For those investing in a second property it’s also a race to beat April’s legislation-adding an extra boost to overall house purchase approval levels,’ Sexton continued.
In addition, small deposit lending climbed in January to reach 12,388 loan approvals. This was an improvement on the 11,546 recorded in December. Annually, this figure rose substantially from the 9,385 small-deposit loans given in January 2015.
Despite January seeing a numerical increase in the total of small-deposit loans granted, this may not necessarily mean an increase in sales. The most recent First Time Buyer Tracker from Your Move and Reeds Rains indicates that in December 2015, there were 26,600 first-time buyer sales. This represented a 4.7% decrease from the 27,900 seen in November.
What’s more, the proportion of total lending compromised by small-deposit approvals in January fell to 14.5% from 16.3% in November and December 2015-forming the smallest proportion since the 13.9% in December 2014.
Buy-to-let approvals soar ahead of tax changes
Mr Sexton feels, ‘ a buy-to-let surge has pushed down the proportion of small-deposit lending-but this figure conceals a more realistic and upbeat picture. In fact, January has been a positive month for small-deposit borrowers-the number of loans approved have reached their highest total for four months, since September 2015. And the slowdown in small-deposit lending seen towards the end of 2015 hasn’t continued into 2016 so far.’
For first-time buyers, prospects are looking bright. Government initiatives introduced to help first-timers onto the property ladder appear to be working. According to the Treasury, large numbers of aspiring homeowners have taken advantage of the Help to Buy ISA and this is an incredibly promising start,’ he added.
Concluding, Sexton acknowledged that, ‘challenges do remain, supply issues are ongoing and the promise of starter homes may take longer to be realised, but for first-time buyers, lenders remain willing to support