According to the Bank of England’s latest Credit Conditions Survey, remortgaging levels also rocketed in the final quarter of 2016, while prime lending saw a slight rise.
Lenders expect overall demand for mortgage lending and prime lending to continue into the first three months of 2017.
Steve Olejnik, chief operating officer of Mortgages for Business, said: “There was an obvious incentive for landlords to do business in the final quarter of 2016, which led to an increase in buy to let borrowing. Many investors will have wanted to beat the PRA’s tightening of buy to let affordability checks, which came into force on 1 January, as well as the forthcoming changes to income tax relief on finance costs. Increased landlord confidence will have also been driven by greater familiarity with the changes to stamp duty earlier the year, and a more stable macro-economic outlook following post-referendum turbulence.
“While the fiscal and regulatory changes will affect investor demand, the property market will continue to offer strong returns to those who take an intelligent and level-headed approach to their portfolios.”
The Bank of England survey, which uses a net percentage balance to calculate lender responses, showed that lender willingness to lend to borrowers with smaller deposits dropped in the final quarter and is expected to fall further over the next three months.
Positive balances, which are scaled to a maximum of +100, indicate that lenders expect demand, credit availability or defaults to be higher, with negative balances indicating a lower expectation.
For example, lenders’ overall score for buy-to-let lending demand totalled 34.7 for the final quarter of 2016, dropping to a negative score of -14.2 for its predicted demand over the next three months.
Default rates on secured lending fell in Q4, with losses resulting from defaults falling significantly as a result. Lenders expect defaults to remain unchanged over the next three months.