New buy-to-let lending remained flat at the end of last year, but remortgages in the sector are high, distorting the outlook for the market, according to the Council of Mortgage Lenders (CML).
Instead, home movers and first time buyers dominated mortgage lending in November 2016 – the latest month for which data is available.
House purchase loans
New Buy-to-Let Lending Remains Flat, but Remortgages are High
Lending to homeowners increased by 5% between October and November, to a total of £11 billion, up by 2% on an annual basis. Homeowners took out 60,800 loans, up by 5% on the previous month and 0.2% over the year.
First time buyers borrowed £4.7 billion, up by 4% month-on-month and 9% on November 2015. This equated to 30,100 loans, up by 5% on October and 8% annually.
Meanwhile, home movers borrowed £6.3 billion, up by 7% on the previous month, but down 5% compared with November 2015. This represented 30,700 loans, up by 6% on a monthly basis, but down 6% year-on-year.
Buy-to-let lending reached £3.2 billion in November last year, up by 10% on October, but down 9% on an annual basis. Landlords borrowed 21,000 loans in total, up by 13% on the month, but down 10% when compared to November 2015.
The CML reports that these figures make it look like buy-to-let lending has returned to times before the Stamp Duty rush, when 23,500 loans were recorded in March 2016 and 21,900 in April 2016, before dropping to around 18,000 each month for the rest of the year.
But the latest figures are slightly skewed by remortgages, as this type of loan actually made up 14,000 of the 21,000 loans lent in the buy-to-let sector.
The CML data also shows that the proportion of household income used to service capital and interest rates reached another historic low in November for both first time buyers and home movers, at 17.5%.
The Director General of the CML, Paul Smee, comments on the figures: “November lending reflected stable market conditions. Overall, 2016 did not match recent years in terms of house purchase lending growth, but lending remained resilient through regulatory and political change, and aspirations for homeownership remain strong in the UK.
“Our forecasts for 2017 may be less bullish than a year ago, as economic uncertainty weighs on the market, but we still predict 1.2m transactions and a slight increase in gross lending to £248 billion.”
He looks at the buy-to-let sector: “Buy-to-let lending, driven by remortgage activity, saw its strongest monthly lending level since the Stamp Duty changes on second properties introduced last April. Despite this, we expect buy-to-let lending levels in both 2016 and 2017 to prove lower than their 2015 recent peak, as further tax changes take effect.”