Buy-to-let scramble boosts monthly mortgage lending 20%

The scramble to snap up buy-to-let properties ahead of April’s stamp duty rise has boosted lending for the sector to its highest level in nine years.

The data, published by chartered surveyor e.surv states buy-to-let lending has risen 20.6% in January; from 70,837 purchase approvals to 85,432 last month.

House purchase lending has also ramped up with 39.3% more loan approvals in January compared with January 2015.

Small deposit lending (where deposits are less than 15% of the value of the property) with 12,388 approvals compared with 11,546 in December. The monthly increase was also accompanied by a yearly increase, up 9,385 in January 2015.

However the proportion of small deposit mortgages decreased as a proportion of total lending, down to 14.5% from the 16.3% in November and December.

Richard Sexton, director of e.surv chartered surveyors, said: “Buy-to-let approvals contributed to the growth in January home lending. Concerns about the sector’s growth have sparked a wave of legislation but as stamp duty changes come into effect this April, there’s been a rush to get buy-to-let loans approved. Many have predicted a narrowing of the buy-to-let sector but actually what we’re seeing in lending quarters appears to be the opposite.

“This buy-to-let rise also hasn’t been at the expense of first-time buyers. The number of small-deposit loans granted has risen in January, and this is a great sign that lenders still have the appetite to give first-timers a chance. Rising wages and a delayed interest rate rise have also boosted first-timer’s prospects.

“For those investing in a second property it’s also a race to beat April’s legislation – adding an extra boost to overall house purchase approval levels.”

A buy-to-let surge has pushed down the proportion of small-deposit lending – but this figure conceals a more realistic and upbeat picture. In fact, January has been a positive month for small-deposit borrowers – the number of loans approved have reached their highest total for four months, since September 2015. And so the slowdown in small-deposit lending seen towards the end of 2015 hasn’t continued into 2016 so far.

“For first-time buyers, prospects are looking bright. Government initiatives introduced to help first-timers onto the property ladder appear to be working. According to the Treasury, large numbers of aspiring homeowners have taken advantage of the Help to Buy ISA, and this is an incredibly promising start.[1] Challenges do remain, supply issues are ongoing and the promise of starter homes may take longer to be realised, but for first-time buyers, lenders remain willing to support credit-worthy borrowers.”

The news comes as the number of voices calling for changes to the new prospective Stamp Duty regime grow.

Simon Law, Chairman of the Society of Licensed Conveyers said: “for a Government that has expressed its intent to speed up the home buying and selling process, this proposed reform seems a step backwards. The new levels of bureaucracy that it will entail, particularly for property buyers and their lawyers, will cause delays to property transactions. It is also likely to increase legal costs for all home buyers to cover the additional work involved for conveyancers. This flies in the face of the Government’s intention to improve the UKs standing in the World Banks ease of doing business rankings.

“SDLT is a tax, and ultimately HMRC must take responsibility for policing this new obligation and detecting where buyers do not disclose that they own other assets. It is unreasonable and an abdication of responsibility to expect conveyancers to police this new tax.”

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