There was a sharp decline in the amount buy-to-let investors borrowed to acquire property in August, reflecting the fact that a climate of uncertainty is brewing among private landlords, the latest mortgage lending data suggests.
Fresh figures released by the Council of Mortgage Lenders (CML) show that buy-to-let landlords borrowed £3bn in August - down 12% year-on-year, with 19,400 loans in total issued to those looking to invest in the private rented sector, which was up 4% compared to July but down 13% compared to August 2015.
Although gross buy-to-let lending remained significantly below levels achieved a year earlier, there were 1,000 more buy-to-let loans in August than in July. But almost two thirds of buy-to-let loans were remortgages rather than house purchase.
Despite the drop in buy-to-let lending, there was an overall increase in house purchase lending which hit £12.2bn in August, up 14% compared with July and 11% higher than the corresponding month last year.
Paul Smee, director general of the CML, said: “House purchase activity bounced back from a dip in July, reflecting resilience in first-time buyer activity. Mortgage rates remain at or close to historic lows, and the re-pricing of mortgages following August’s base rate cut should help to underpin a continuing, strong appetite for home-ownership over the coming months.
“Buy-to-let by contrast continues to operate at lower levels five months after the stamp duty change on second properties. This appears to be a long-term trend, and with lenders potentially tightening affordability checks ahead of the tax changes in April 2017, activity on the buy-to-let house purchase side may well remain at current levels.”
In terms of volume, property purchasers took out 66,000 loans – up 13% on July and 24% on August last year.
First-time buyers borrowed £5.1bn, up 13% on July and 24% on August last year, which equated to 31,800 loans, up 12% month-on-month and 19% year-on-year.
David Brown, CEO of Marsh & Parsons, commented: “August’s figures from the CML present a picture of a return to normality following the UK’s vote to leave the EU, with homeowner lending up year-on-year and from the previous month. Despite the many uncertainties that still surround which form of Brexit the country will take, for many, the dust has settled and property remains a safe bet.
“First-time buyer growth is also positive and suggests the UK’s enthusiasm and appetite for home ownership has not been dented. It’ll be interesting to see what happens over the coming months with this group: confirmation that the Help to Buy Mortgage Guarantee scheme will end later this year could see first-time buyers clamouring to purchase before then.
“The collapse of the pound also means the UK property market – particularly London, which has long been a favourite for overseas investment – is more attractive. Further falls, as predicted by the Bank of England’s new policy maker, Michael Saunders, are unlikely to change this any time soon adding further demand and bolstering the property market.
“All-in-all the market remains in robust shape, confidence is high and we expect momentum to be maintained throughout the rest of the year.”