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Softening mortgage market highlights BTL concerns

Buy-to-let mortgage activity continued to slow in October, as fewer landlords took out home loans as a result of tax changes and tougher mortgage lending standards.

Landlord investors took out just 6,100 new buy-to-let mortgages to buy property in October, down 9% on the same month last year, while the total value of BTL loans dropped by 20% to £800m, the latest figures from UK Finance show. 

But while there has been a drop in the number of buy-to-let investors actively looking to invest following the stamp duty and income tax crackdown, the data from the industry body reveals that the buy-to-let remortgage market actually increased to 15,700 completions, which is 5.4% higher than the same month a year earlier, at a value of £2.5bn.

The increase reflects the fact that the remortgage market has soared as more borrowers, including buy-to-let landlords, look to take advantage of a competitive market and lock into attractive deals, providing greater certainty at a time of uncertainty around Brexit and the economy.

Jonathan Harris, director of mortgage broker Anderson Harris, commented: “With the number of new purchases remaining subdued, lenders are focusing on where the business is and offering competitive deals to those coming off fixed-rate mortgages - this trend is set to continue into 2019.”

The lack of competition from landlords for properties will inevitably reduce the supply of much needed housing in the private rented market, adding to the growing supply-demand imbalance in the sector which some experts believe will drive up rental prices.

A supply shortage could push up rents up by 15% over the next five years, according to the Royal Institution of Chartered Surveyors (RICS).

Commenting in August, Simon Rubinsohn, RICS chief economist, said: “The impact of recent and ongoing tax changes is clearly having a material impact on the buy-to-let sector as intended.

“The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government-funded social housing.”

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