The latest UK Finance Mortgage Trends Update for August 2018 reveals that there was a significant drop in the number of new buy-to-let house purchase mortgages completed in August 2018. The data shows a 13 per cent drop in buy-to-let home purchase mortgages completed in August this year compared with August 2017. By value this was £0.8bn of lending in the month, 20 per cent down year-on-year.
Experts from Property Partner, the online property stock exchange, attribute the slowdown to the ongoing impact of tax changes as well as the recent interest rate rise. This is supported by the findings of a survey of more than 1,000 buy-to-let landlords, conducted on behalf of Property Partner, which finds that more than half (54%) of BTL landlords are selling some or all of their properties as a result of the changes.
The research also finds that the introduction of an extra 3% stamp duty on the purchase of additional homes and the reduction in mortgage interest tax relief, as well as the recent rate hike will hit the pockets of renters most:
- 38% of BTL landlords would increase rent to compensate for interest rate rises
- 37% of BTL landlords would increase rent to compensate for increased costs from buy-to-let changes
Other key findings:
- 35,500 new first-time buyer mortgages were completed, some 2% more than in the same month a year earlier. The £6.1bn of new lending in the month was 5.2% more year-on-year. The average first-time buyer is 30 and has a gross household income of £42,000.
- 38,000 new homemover mortgages were completed, some 2.3% fewer than in the same month a year earlier. The £8.5bn of new lending in the month was the same year-on-year. The average homemover is 39 and has a gross household income of £57,000.
- 37,100 new homeowner remortgages were completed, some 0.3% fewer than in the same month a year earlier. The £6.5bn of remortgaging in the month was the same year-on-year.
- 13,800 new buy-to-let remortgages were ompleted, some 4.5% more than in the same month a year earlier. By value this was £2.2bn of lending in the month, 4.8% more year-on-year.
Mark Weedon, Head of Research at Property Partner, says: “The Government’s big shake-up of buy-to-let investing is evidently taking its toll on landlords, but the changes are hardly having the desired effect for renters.
“This data may show that existing landlords have not yet sold off their investments in swathes as they look to re-mortgage. However, our research suggests buy-to-let landlords are finding other routes to ensure their investments remain economic. 37% of buy to let landlords say they would increase rents on account of the buy-to-let crackdown. This will make it harder for those with dreams of home ownership to save for a deposit, as more spending will go towards their monthly rent. Ultimately, the Government must consider the impact of its policies, and urgently review the mechanics of the buy-to-let sector which is key to a strong and growing private rental sector. Penalising buy-to-let landlords can in turn penalise tenants.”
Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance, said:
“Overall house purchase completions remain stable, driven largely by the number of first-time buyers which reached its highest monthly level since June 2017.
“Buy to Let remortgaging saw relatively strong growth in August, due in part to the number of two year fixed deals coming to an end. This suggests that while new purchases in the buy-to-let market continue to be impacted by recent tax and regulatory changes, many existing landlords remain committed to the market.
“However, the homeowner remortgaging market has softened slightly, reflecting the many borrowers who had already locked into attractive deals in the months preceding the Bank of England’s base rate rise.”