Buy-to-Let Market Leads the Surge in 8 Year High Mortgage Lending
A surge of buy-to-let and second home buyers in March prompted the mortgage industry to announce their highest lending figures of £17.1 billion – the highest amount of the past 8 years.
The figures, as released to the media, show a dramatic increase in lending from a year ago, with a 64% upturn from the same month in 2015 and represents lending amounts last seen prior to the financial crash of 2008.
Beating the Stamp Duty Rise
A major factor in this rise can be attributed to the rush from buy-to-let investors and those buying second homes, to get transactions through before the proposed hike in stamp duty. The 3% rise takes effect on such purchases from April 2016.
The bumper figures for March have not come as a major shock to the industry, following on from predictions as far back as December and January that the stamp duty changes would prompt a busy first quarter. Chancellor Osborne’s November announcement about the levy increase seeming to have created a surge from those seeking investment in the buy-to-let market to drive their sales through. All of which has created what’s been referred to as a mortgage bottleneck among the buy-to-let and second home fraternity.
It has indeed seen a fairly major demand from investors to get their mortgages through by the end of March, with the Council for Mortgage Lenders even suggesting that it’s prompted the largest mortgage distortion ever.
Market Likely to Stabilise
The overall surge in mortgage sales is not thought likely to continue on such a dramatic scale in the post-April period, with those rushing to beat the stamp duty rise having already done so.
That being said, there seems to be no reason to suggest that the buy-to-let market has become significantly less viable since the changes. More that investors will likely need a degree of time to adjust financial matters to account for the levy increase and the changes in relation to tax relief. As mentioned on these pages in the past, it’s conceivable that we’ll see a shift towards commercial entities taking up mortgages for buy-to-let portfolios as we move forward.
As quoted on the mortgagestrategy blog, Mortgages for Business MD David Whittaker says:
“Investors may also use this quieter period to work out how to manage the upcoming implementation of relief restrictions on the buy-to-let market, with some landlords opting to move to limited company mortgages to avoid many of the more costly changes.”
Moving portfolios away from private ownership and into corporate entities is generally seen as the smart play for investors to maintain margins by offsetting expenses against tax. However, for many, there may be something of a time lag in order to make the changes happen. With the impeding referendum on Europe looming, there’s the possibility of a brief slowing in the build up, all of which would provide a balance against the dramatic surge in March.
Looking further ahead, there has to remain an optimism in the buy-to-let market. Business models may have to change but factors such as housing shortages and continually rising house prices are keeping the demand for quality rental properties high, providing the UK property market as a whole with investment opportunities that can deliver sustained, long-term growth.