Demand for property has continued, driven by low interest rates (currently at 1.42% for a two-year fix with 75% LTV – according to Bank of England averages) and the combined efforts of industry and government to support first-time buyers. Indeed, the Halifax First Time Buyer Review showed that there were more first-time buyers in 2016 than in any other year since the financial crisis.
However, in 2017, given that the Help to Buy Mortgage Guarantee scheme is no longer available, it is important that the government continues to provide support to fledgling buyers if they want to see this momentum maintained. Alongside this, low rates have also resulted in extraordinary growth in the remortgage market, with huge numbers of consumers switching in search of better deal.
As we look ahead, it is the buy-to-let sector which has the most uncertain future in 2017, thanks largely to the continued effect of the Stamp Duty surcharge as well as further regulatory and taxation changes coming into force in April and October. The latest figures from the CML showed that buy to let rebounded slightly in November, following a significant fall in lending values across Q2 and Q3. The small spike in demand has been driven by landlords who saw the end of the year as a window of opportunity to avoid the PRA’s changes to affordability requirements and lenders’ increases to interest coverage ratios (ICR). As such, lending is expected to cool again the first quarter of 2017.
Over time, however, it is likely that the buy-to-let market will adapt and evolve to find a natural equilibrium. New regulations will become familiar and landlords will factor the changes into their planning. As many specialist buy-to-let lenders will want to maintain business levels, we can also expect to see new and innovative product solutions. Products tailored to landlords using limited company vehicles could see particularly high growth in 2017.
That said, CML data shows that the volume of buy-to-let lending in the three months to November is still down by 39% on the same period in the previous year, and is unlikely to reach them again anytime soon. Unfortunately, for the average renter, the reduction in the supply of rental housing coupled with the ICR changes for landlords are resulting in higher rents. For anyone saving for a deposit, this will only make buying more difficult.
Going forward it is therefore vital that the government continues to support all tenure types, including buy to let, With the new Housing White Paper due to be published imminently, we expect to see the May government setting out a far more tenure neutral stance than some of its predecessors and that is all to the good – there is after all no single tenure or policy solution to the current housing crisis.