BTL taxes ‘working’ as first-time buyers and home mover numbers soar

UK Finance noted that home movers had their highest monthly activity levels for over a year and there was an especially high number of loans for first-time buyers.

Meanwhile, buy-to-let activity slumped between April and June.

The results were welcomed by many in the industry, although there have been calls from politicians and senior advisers to reverse the tax changes for landlords.

This appears unlikely given government policy aims to increase first-time buyers.

Homebuyers dominate

According to UK Finance (formerly the Council of Mortgage Lenders), homebuyers (which includes first-time buyers and homemovers) borrowed £34.4bn during the three months to June, up 18% on Q1 and 24% on the same period in 2016.

This equated to 183,300 loans, up 16% on Q1 and 9% on Q2 2016 respectively.

Homemovers were the biggest gainers of this swing away from buy-to-let, borrowing a total of £19.6bn, up 19% on Q1 and 21% year-on-year, from 92,200 loans, up 17% on Q1 and 13% respectively.

First-time buyers borrowed £14.8bn, which is up 18% on last quarter and 10% on Q2 2016, from 91,400 loans, which is a rise of 15% and 6% respectively.

These groups saw particularly strong performances in June, both borrowing 26% more than in May with a similar increase in the number of loans.

Remortgage and BTL dips

Remortgage activity fell in the second quarter by 11% compared to the first three months of 2017 to a total of £16.9bn, from 96,900 loans (down 12% on Q1). Both these figures were broadly in line with Q2 last year.

Gross buy-to-let lending totalled £8.4bn (down 6% on Q1) from 55,400 loans (also down 6% on Q1).

Both these figures were 5% up on Q2 2016, but this period was the slump following the spike in buy-to-let sales during spring 2016.

Resurgance of FTBs

Mortgage Advice Bureau’s head of lending Brian Murphy highlighted the positive re-emergence of first-time buyers.

“It’s also a positive sign to see that the average income of first-time buyers has increased, albeit slightly, to £41,000, meaning that the income multiples for a first mortgage are at 3.59%,” he said.

“This is worthy of particular note for two reasons; first-time buyers underpin the rest of the property market, so positive movements in this sector ripple upwards and keep the rest of the ecosystem functioning.

“Second, increased first-time buyer activity is a direct consequence of the changes in taxation for investors, so whilst this has taken a while to filter through, the positive impacts of this initiative are now being seen as more stock is available for first-time buyers to purchase.”

BTL will not disappear

Connect for Intermediaries managing director Liz Syms echoed much of these sentiments: “If the intention of the additional Stamp Duty on buy-to-let was to slow the amount of purchases by landlords and increase the number of first time buyers then based on today’s UK Finance figures you would have to say that it is working.

“There may well be a small surge in purchases by portfolio landlords in September ahead of the new rules that will make it tougher for them to borrow after the 1 October, then I expect to see a slight dip again as the new regulations bite – until people get used to them and they become the new normal.

“There are still opportunities for landlords however and the need both for a better return on investment as well as the need for private rental property will mean that the buy-to-let market will not disappear,” she added.

Busy month

UK Finance head of mortgages Paul Smee said the June figures showed a busy month in the mortgage market.

“Buy-to-let activity remains subdued compared to its 2015 peak but consistent month-to-month since the Stamp Duty changes in April 2016.

“But there are also signs of a softening market and we are not anticipating that this performance will be sustained in the second half of 2017.

“A slightly lop-sided market could well show some growth in house purchase lending but alongside reduced remortgage and buy-to-let activity,” he added.