The latest Bank of England mortgage figures, showing a rise in approvals, could disguise the fact that buy-to-let is propping up the market, analysts said.
The Bank of England yesterday reported 52,410 mortgage approvals last month, up 5% from July when the figure was 49,644. By value, loan approvals for house purchases rose from £7bn in July to £7.3bn.
The number of approvals for remortgaging increased by 9.5% from 31,652 in July to 34,668 in August. By value, remortgage levels rose to £4.3bn in July to £4.3bn.
But David Whittaker, managing director of buy-to-let specialist Mortgages For Business, said the increases in both new mortgage and remortgage approvals could have been largely driven by property investors.
Whittaker said: “Whilst buy-to-let lending to individuals has been lumped in with the total figures, we all know that it’s most likely the professional investors who are making hay while the sun shines.
“Remortgaging activity has probably increased because landlords have refinanced to expand their portfolios and house purchase figures have risen as they use this equity to snap up properties as prices sit idle and rents soar.
“Until reporting on buy-to-let lending to individuals is published monthly instead of quarterly, it remains difficult to make real sense of these figures.
“However, the likelihood is that the lending market is being propped up by the residential investment sector particularly with so much uncertainty surrounding the economy and first-time buyers largely locked out the of market.”
David Brown, commercial director of LSL Property Services, agreed. He said: “While would-be buyers make take comfort from the up-tick, demand for buy-to-let has been a key driving force behind the improved lending picture in August.
“Despite the recent withdrawal of quite a few cheaper rates in the last week, there are still more than double the number of buy-to-let products on the market compared to last year, and demand for finance from would-be investors remains strong.
“With gross yields stubbornly remaining above 5%, demand at an all-time high, and average rents climbing as high as £713 per month, many investors are making hay while the sun shines and this has been reflected in an expanding buy-to-let mortgage market.
“However, we don’t foresee a dramatic and sustained improvement in the level of lending across the wider market in the foreseeable future. The outlook for the economy has worsened in recent months, and many banks still must repay money they owe the government. Against this backdrop, it’s unlikely many will be able to vastly up their commitment to mortgage lending in the medium-term.”
Mike Cook, head of mortgages at the Post Office, which last week withdrew its buy-to-let mortgage range, took a slightly different view of the Bank of England figures, whilst managing not to mention buy-to-let at all.
He said: “It’s great to see the market building momentum again after such a long period of stagnation. First-time buyers are the people who have been most affected and have really struggled to get a foot on the ladder.”