Mortgage lending rose substantially during August, with gross lending reaching a nine-year high of £22.5bn. However, lending in the buy-to-let sector has remained subdued, according to the latest figures released by the Council of Mortgage Lenders.
This data suggests that, when seasonal factors have been taken into account, lending has been stable over the last few months. Despite this, the figures indicate that remortgaging activity is more prominent in the buy-to-let market.
Buy-to-let activity has seen something of a slowdown, following the introduction of the additional 3% stamp duty surcharge in April. In addition, some lenders are offering more stringent affordability criteria, with one eye on the tax relief changes scheduled for 2017.
Senior economist at the Council of Mortgage Lenders, Mohammed Jamei, said: ‘house purchase activity for buy-to-let continues to remain subdued, even as we move away from the stamp duty change and is firmly down compared to a year ago.’
‘This looks set to continue going forward, given that lenders have been tightening affordability criteria in anticipation of the forthcoming interest tax relief changes in April 2017.’
A growing number of lenders are moving to cut buy-to-let mortgage rates in an attempt to generate more business from investors. Many lenders are demanding rental coverage of 145% from buy-to-let landlords, due to restrictions of mortgage interest tax relief landlords are able to claim from next year.
Mike Richards, director of London-based Mortgage Concepts Associates, noted: ‘lenders reducing rates is not going to help at all because the Government has crucified buy-to-let.’
‘While an interest rate is one of the concerns, it is not the only concern. People have a finite amount of money for deposits and most people will have to pay 3% extra stamp duty while lenders are increasing their stress rates,’ he added.