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‘Rollercoaster year’ for mortgage market in 2016, confirms CML

by: Heather Greig-Smith
  • 26/01/2017
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‘Rollercoaster year’ for mortgage market in 2016, confirms CML
Gross mortgage lending rose 12% in 2016 to £246bn, according to estimates by the Council of Mortgage Lenders (CML).

There were also marginally more property transactions in 2016 than 2015 – 1.23 million. However, the CML said these figures mask what was a rollercoaster year for the market.

CML senior economist Mohammad Jamei pointed to the jump in buy-to-let and cash transactions in March, before the Stamp Duty surcharge on second properties came into effect. This was followed by a weak period of activity and then the EU referendum in June.

“Given this distortion, it became more difficult to say what impact the EU referendum in June had on the market,” he said.

“What we know is that there was a summer dip, likely to have been caused by sharp weakening of consumer sentiment and increased uncertainty immediately after the referendum. Part of this uncertainty dissipated soon after, as the political leadership vacuum was resolved, and the Bank of England took swift action.”

While approvals numbers bounced back towards the end of the year, they still lower than they were the same time a year ago.

However Jamei said this recovery in approvals should feed through to lending figures in the early months of 2017. “The current availability of mortgage credit is benign, and the real issue continues to be a dearth of properties on the market, which adds to the challenges facing would-be buyers.

Uncertainty associated with political factors and prospective changes to the tax treatment of landlords will weigh on prospects for the year ahead.”

The CML predicts slower or limited growth in landlord portfolios rather than the cliff edge caused by Stamp Duty change.

More positively, first-time buyer numbers have increased, reaching 337,000 in the 12 months to November 2016 – the highest number in any 12-month period since February 2008.

Henry Woodcock, principal mortgage consultant at IRESS, said: “The buy-to-let market’s loss appeared to have been the owner-occupiers gain, as the number of first-time buyer valuations rose by 26% compared to December 2015.”

He added: “Overall the market in 2017 is likely to be dampened by uncertainties around the economy and buy-to-let lending levels are expected to be lower as further tax changes take effect.”

Remortgaging is also seeing increased momentum, with bolstered competition among lenders, the interest rate cut and launch of the Term Funding Scheme playing a part in this.

Jamei said the upcoming Housing White Paper is also promising for the market, though any new policies will take time to have an effect.

Stephen Smith, director, Legal & General Housing Partnerships, said that, with the Housing White Paper imminent, “many in the industry will be focussed on how we can ensure lending levels continue last year’s strong performance by improving affordability and increasing fluidity across all levels of the housing market”.

“Not only do we need to see significantly more homes being built every year to redress the supply/demand issue, but we also need to eliminate some of the barriers to moving that are currently preventing existing housing stock from coming back on to the market.”

He suggested removing “punitive” taxes such as Stamp Duty for people looking to downsize and first time buyers.

However, he added that the figures “highlight the resilience of our nation’s housing market”.

“Despite the market being plagued by economic uncertainty, gross lending still increased compared to 2015.”

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