Buy to let mortgage lending still the star in the UK housing market

Mortgage lending to first time buyers in the UK increased by volume month on month and on an annual basis in September, the latest data from the Council of Mortgage Lenders shows.

However, in contrast, lending to people moving home saw a dip in September compared to August, but grew by volume and by value compared to a year ago while home owner remortgage activity rebounded after a dip in August to increased levels in September both compared to a month ago and the same time last year.

The buy to let sector continues to grow and saw year on year increases by volume and by value in both buy to let house purchase and buy to let remortgage sectors.

The CML data also shows that first time buyers increased in number of loans advanced and amount borrowed both in comparison to quarter two and the third quarter last year and home mover lending saw a similar trend to first time buyers but the percentage increases by volume and by value were higher.

Home owner remortgage activity saw an increase compared to the second quarter of the year, but a more substantial increase compared to the third quarter 2014 while buy to let saw large quarter on quarter and year on year increases by number of loans and amount borrowed.

Paul Smee, director general of the CML, pointed out that the mortgage market had a slow start to the year. ‘This quarter shows it is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the New Year,’ he explained.

‘Buy to let continues its growth this period, but at 18% of new lending in September remains the fourth largest lending type behind first time buyers, home movers and remortgage. There were five times as many house purchase loans to home-owners as buy to let landlords in September, and the growth in buy to let lending largely continues to reflect its more belated recovery from recession,’ he added.

According to Rishi Passi, chief executive officer of Oblix Capital, on the one hand Help to Buy has driven up borrowing by first time buyers both in volume and value and on the other, there is little sign that impending buy to let tax restrictions are dissuading landlords from expanding their portfolios.

‘Meanwhile cheap money is allowing lenders to offer historically attractive rates to the market and as a consequence lenders are enjoying their best spell since 2008, enticing first time buyers and developers alike to move and borrow,’ he said.

Also with any periods of unoccupancy there is always the need to insure adequately Dan Towner of advised.

Rob Weaver, director of investments at property crowdfunding platform Property Partner, the growth in buy to let lending underlines the continued confidence UK investors have in this asset class. ‘As an asset class buy to let is also benefiting from the growing concern about the state of the global economy. It is seen as safe,’ he added.

Myles Williams, chief executive at Fast Property Finance, said that buy to let is the stand out trend in the current mortgage market. ‘Buy to let has come into its own in recent years and is being driven by people’s understanding that house price levels and supply problems are creating a significant investment opportunity. The relaxation of the pension rules and economic turbulence around the world have also resulted in greater demand for buy to let,’ he pointed out.

‘Buy to let is an asset class that people in the UK are comfortable with and feel protects them in a way that equity-based investment never could,’ he added.

He also believes that it should be no surprise that remortgages were up cross the board given some of the messages that have emerged from policymakers in recent months but expected interest rate rises in 2016 could result in reduced activity in this sector.

‘Overall, the picture emerging from this data is one of a property market where demand is strong across the board. If only the same could be said of supply,’ he added.

Steve Bolton, founder of Platinum Property Partners, pointed out that the buy to let sector has seen stronger year on year growth than the residential market for most of the year.
‘Although often the scapegoat for affordability issues in the housing market, this illustrates that BTL is not preventing residential buyers from getting on the housing ladder and the lack of property supply plays a much larger role,’ he said.

‘Landlords provide a valuable service, with rental demand, both from people priced out of the housing market and those who prefer to rent, at an all-time high. However, the number of rental properties on the market could see a decline once mortgage tax relief changes come into effect, as some landlords face becoming unprofitable,’ he warned.

‘Those affected by the changes may also be forced to increase rents to stay in the black. Neither reduced supply of rental properties or more expensive rents is likely to achieve the ultimate aim of improving homeownership levels,’ he added.