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CML cuts BTL lending forecasts amid ‘stalled’ mortgage market

  • 22/06/2017
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CML cuts BTL lending forecasts amid ‘stalled’ mortgage market
The Council of Mortgage Lenders (CML) has cut its forecast for the buy-to-let market this year and next year by a combined total of £8bn as government and regulator interventions take hold.

However, the body has not reduced its overall expectations for the mortgage market in these years, suggesting the drop will be replaced by residential or other borrowing.

“We are not changing our gross mortgage lending forecasts for this year,” a CML spokeswoman said.

“We still forecast £248bn for 2017 as a whole. The only change is the buy-to-let data, which we have revised down.”

The CML now expects buy-to-let lending of £35bn in 2017 and £33bn in 2018, a decrease from its previous forecast of £38bn in each year.


Weak start

Its analysis noted that regulators and policy makers had not registered concern with regards to buy-to-let sluggishness and so it expected to see the market continuing to be soft, as the implemented measures worked through and the market prepared for further regulatory changes in October.

CML director general Paul Smee (pictured) noted that buy-to-let had a weak start to 2017 and the sector’s contribution to overall net mortgage lending had fallen considerably over the last year.

“While falling mortgage interest rates have helped support borrowing, tax and prudential measures are exerting pressure on the buy-to-let market,” he said.

“Following the distortion of the Stamp Duty change on second properties last year, we expected a slight recovery in lending levels. However, this has not materialised, and we therefore have lowered our forecast for buy-to-let lending this year and next.

“This re-emphasises the case for avoiding further changes to the tax and regulatory framework until the effect of these already in train have been properly assessed.”


Lending up

In contrast, the overall gross mortgage lending estimate for the month of May was £20.1bn – up 12% on the previous month and on May last year, in which £17.9bn was advanced.

In its analysis, the CML warned that it was less optimistic than the Bank of England’s Monetary Policy Committee (MPC) in its expectations for house approvals and transactions for the rest of the year.

It said: “It’s fair to say that the housing market has stalled, as activity has been subdued for the past few months, with volumes in line with our forecast.

“Mortgage rates are still close to historic lows, but we see little scope for further improvement with recent data showing a slight increase in mortgage rates on offer. This might also temper appetite for remortgaging.”


Sluggish market

Private Finance director Shaun Church noted that it while it was good to see mortgage lending increase, the market remained sluggish, with remortgaging driving a substantial amount of activity.

“The home mover market continues to be dampened by changes to Stamp Duty and a lack of new homes coming on to the market,” he said.

“The latest forecast on the prospects for buy-to-let mortgage lending clearly demonstrates the damage that has been inflicted on the market by the Stamp Duty surcharge and the phasing out of interest rate tax relief.

“A healthy housing market requires a range of tenure types to support both buyers and renters,” he added.

Legal & General Mortgage Club director Jeremy Duncombe echoed concerns about the state of the market.

“A rise in mortgage lending is largely a result of borrowers having to borrow more to get on the increasingly expensive property ladder, not necessarily a symbol of more people getting mortgages,” he said.

“However, in the current low interest rate environment borrowing continues to remain attractive to many, particularly to first-time buyers who help keep the market buoyant.”

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