Gross Home lending up 12% in May but a new Council of Mortgage Lenders (CML) buy-to-let forecast shows a downturn in landlord lending.
The CML has estimated that gross mortgage lending reached £20.1 billion in May, a 12% increase, but the CML’s buy-to-let forecast for 2017 and 2018 has been revised down from previous expectations at the end of last year.
Some of this latter reflects tax and Prudential Regulation Authority (PRA) changes in the housing and mortgage markets.
What’s more guidelines issued last year by the PRA mean that lenders will need to introduce bespoke underwriting standards for portfolio landlords – defined as those landlords with four or more properties – by 30 September 2017.
The new standards are designed to reflect the differences between simple (consumer or small landlords, especially letting their own homes) and complex buy-to-let (BTL), the latter where cash flows and costs arise from multiple tenancies.
But with just months to go before the deadline, brokers are growing increasingly concerned that lenders have as yet been given no indication as to what their requirements will be, which means that as it stands they are unable to give advice to their current clients.
According to CML figures (2016 Landlord Survey), only 4 per cent of the UK’s landlords own four properties, while 8 per cent own five or more, nearly 40 per cent of the country’s rented dwellings.
Following these revelations The CML has issued a plea to the government to make no more private rental sector tax changes for the time being, as landlords have battered by successive attacks over the last few years, including the 3 per cent stamp duty surcharge, changes to tax relief and stricter affordability checks on BTL finance.
These latest CML figures reveal the expected recovery in BTL lending has not happened, with lending to landlords still down, plus, the CML has had to cut its forecast for lending to the private rental sector.
The CML now expects buy-to-let lending to be £35 billion in 2017 and £33 billion in 2018, a decrease from the projected £38 billion in each year, forecast in December last year.
Commenting on market conditions, CML director general Paul Smee has said:
“Remortgage activity and first-time buyers continue to drive lending this year. Looking ahead, we expect to see this trend continue, but not as strongly, as the factors supporting lending are blunted by less favourable economic conditions.
“Buy-to-let had a weak start to 2017, and the sector’s contribution to overall net mortgage lending has 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. 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.”
The Council of Mortgage Lenders’ members are banks, building societies and other lenders who together undertake around 97% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion.
— LandlordZONE (@LandlordZONE) June 29, 2017