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March saw unprecedented lending levels in UK due to buy to let rush
Home owner house purchase lending was up by 60% year on year in the UK in March but the overall lending figures were affected by a rush from buy to let buyers seeking to beat a new stamp duty surcharge. Overall on an unadjusted basis, home owners borrowed £13.8 billion and first time buyers borrowed £4.5 billion, up 32% on February and 29% on March last year, according to the latest figures from the Council of Mortgage Lenders. Home movers borrowed £9.3 billion, up 75% on February and 82% compared to a year ago while remortgage activity totalled £4.7 billion, down 2% on February but up 7% compared to a year ago. Landlords borrowed £7.1 billion, up 87% month on month and 163% year on year but CML director general Paul Smee pointed out that activity was distorted in March due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter. ‘While the increases are substantial, these supercharged levels of activity are likely to be temporary and will fall back over the summer months,’ he added. Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), suggested that while activity has picked up among home movers, the leap in landlord lending makes it clear that price inflation has been fuelled by the Government’s stamp duty changes for buy to let properties and second homes, incentivising many buyers to bring their purchases forward where possible. ‘A policy move that aims to manage long term demand has therefore created short term tremors in the market and made it hard to predict how things will look when the dust settles. The Government’s hope is that first time buyers will find their prospects improved and lenders are certainly doing their bit with first time buyer lending up 29% year on year,’ he explained. ‘Continuing access to high loan to value (LTV) mortgages is an important part of this equation, and should not be frowned upon given the rigorous affordability checks in place,’ he pointed out. ‘Nevertheless, the UK needs a balanced housing market to prosper and playing politics across tenures cannot compensate for the underlying short supply of property. Added uncertainty from the upcoming EU referendum vote means the market is in urgent need of time and space to draw breath. Now is not the time to consider further tinkering under the bonnet after a rollercoaster start to the year,’ he added. According to David Whittaker, managing director of Mortgages for Business, it wasn’t just March which was exceptional. ‘The first quarter as a whole was strong as landlords reacted to tax changes. The dust will begin to settle in this part of the mortgage market through the second quarter of the year,’ he said. ‘Landlords have a new status quo and it’s not just the additional stamp duty that needs to be factored into… Continue reading
Economic uncertainty affecting home lending in the UK
House purchase approvals in the UK fell 19.4% month on month in April and were down 14.9% compared to a year ago largely due to economic uncertainty within the lending market, new research suggests. However, the proportion of small deposit lending climbed to 19.1%, up from 17.1% in March as first time buyer borrowing began to fill the gap left by the buy to let sector as April saw a slowdown in house purchase approvals, according to the latest Mortgage Monitor from chartered surveyors e.surv. The reports says that economic uncertainty is playing a role in this drop, as is the new tax regime for buy to let purchases which saw a surcharge of 3% introduced on additional homes at the beginning of April. ‘The mortgage market is entering a more turbulent phase. As lenders steer for safety, three different forces are at work. First and foremost are the effects of the looming European Union referendum on confidence and certainty for the UK. Whichever way the result, financial markets could see rapid shifts in the days and weeks beforehand and especially immediately afterwards,’ said Richard Sexton, director of e.surv chartered surveyors, ‘It’s crucial for lenders to manage risks in the coming months. There now looks to be completely different interest rate speculation on the horizon and all eyes will be on the Bank of England to see the next steps taken. With some calls to cut interest rates rather than raise them, lenders will have to remain even more alert to economic conditions. And slowing growth is a further sign which is adding to doubts over economic security in general,’ he explained. ‘Despite all these ongoing risks, the underlying core of the lending market appears strong enough to weather such tests. For some first time buyers, prospects are improving and despite rising house price costs, lenders remain keen to help credit worthy borrowers get on the property ladder,’ he added. The report also shows that the proportion of small deposit lending to buyers with a deposit worth 15% or less of their properties’ total value climbed in April to account for 19.1% of overall house purchase loans granted, up from 17.1% the previous month. April 2015 saw small deposit lending comprise just 16.3% of overall house purchase approvals. April saw, in absolute terms, 10,985 small deposit loans granted, down 10% from the 12,202 granted in March. However this total was just 0.3% behind the 11,018 small deposit loans approved in April 2015. The number of completed sales to first time buyers picked up considerably in March. The latest First Time Buyer Tracker from Your Move and Reeds Rains revealed that March saw 32,500 first time buyer sales, up 47.7% from 22,000 in February. Sales to first time buyers also grew on an annual basis, rising 34.9% from 24,100 in March 2015. ‘With the buy to let sector finally stepping out of the spotlight, attention is turning to the bottom of the property ladder. This… Continue reading
Student property investment in UK hit record high in 2015
Investment volumes in student property in the UK reached a new record at £5.1 billion in 2015, more than doubling the previous year’s figure of £2.41 billion. It also accounted for 7.12% of total UK commercial real estate investment volumes with growth expected to continue due to strong market demands, according to the latest report from property firm Knight Frank. Indeed, Knight Frank predicts that the year-on-year rental growth witnessed in 2015 within student accommodation will continue in 2016, leading to a rental uplift of 3.5% over the year, providing a relatively secure income base for investors. ‘2015 was a bumper year in terms of transaction volumes, and whilst portfolios dominated activity, we expect to see an increase in single asset opportunities throughout 2016,’ said James Pullan, head of student property at Knight Frank. ‘We predict a rise in institutional and international investors looking to invest in a buoyant asset class as pipeline opportunities come to market and investors look to diversify their asset portfolios,’ he pointed out. ‘Despite predictions that the London development pipeline will fall, we anticipate that other UK markets will open up and that there will be a consolidation in the sector,’ he added. The report also explains that this increased momentum within the student property industry demonstrates a broader trend of a substantial shift to the alternative asset classes by investors, with purchasers now viewing specialist sectors as a resilient asset class, delivering longevity and stable income flows. The data from the firm shows that some 18% of all commercial property investment transactions in 2015 were in specialist property and Knight Frank predicts that total investment into these sectors will increase by 10% year on year to reach £14.3 billion by the end of 2016. All four core specialist sectors; hotels, healthcare, student property and automotive, saw volumes exceed their five and ten year averages in 2015. Since 2006 some £46.6 billion has been invested into these sectors, with a record £13 billion invested in 2015 alone. Continue reading
