BTL increases market share as first-time buyer lending dips: BoE
Updated: Aug 28, 2018
The share of buy-to-let lending increased for the first time since the start of 2017 to take 14.1% of new loans in Q1 2018, according to the latest MLAR data from the Bank of England.
The data, provided by around 340 regulated mortgage lenders and administrators, found that despite the rise in buy-to-let lending, the quarter saw a decrease in total mortgage lending activity when compared with Q4 2017.
New commitments are at their lowest level since Q3 2016 and there has been a 3.4 percentage point decrease in the proportion of new loans for house purchases to 61%, driven by a further decrease in home movers.
The share of first-time buyers also fell by 1.6 percentage points to 19.6% in Q1 2018, with the proportion of high loan-to-income lending and the highest loan-to-value brackets also seeing a decrease in new lending.
The Bank of England says the decrease in high-LTV lending can be linked to a rise in remortgaging, which increased by a further 3.2 percentage points over the quarter and now accounts for 32.9% of all new lending.
Despite the recent rate rise, Q1 2018 saw the proportion of mortgage loans at less than 2% above Bank base rate continue to increase to 76.1% of the market as lending remained competitive.
The proportion of total loan balances in arrears decreased further to 1.06% at the end of Q1 2018, the lowest level since the series began.
Jeremy Leaf, north London estate agent and former RICS residential chairman, commented: “Although a little historic, the decrease in mortgage lending is disappointing. But of more concern is the fall in proposed advances."
“The reduction in the proportion lent to first-time buyers when buy-to-let investor borrowing increased for the first time in more than a year may be a sign that the government’s intention to ‘level the playing field’ between the two groups is not working."
“On the ground, we’ve noticed more interest in competitively-priced smaller houses rather than one and two-bedroom flats which have previously been favoured by first purchasers and landlords."
“However, commitment is hard to generate while political and economic uncertainty reigns unless buyers and sellers take full account of the new softer market conditions.”
Liz Syms, CEO at Connect for Intermediaries, added: “Despite a raft of changes hitting landlords in the past couple of years, the sector is incredibly resilient. The reason for this is there are still very good returns to be had in the buy-to-let market – this is despite changes to the tax regime, portfolio landlord, EPC and the forthcoming tightening of HMO rules.
“Some people who are not serious about buy-to-let and not prepared for all the changes will have left the market; however landlords that have well run properties, kept to a good standard will still be making profits and, as a result, are continuing to expand their portfolios, so I think this is what we are seeing in these figures from the Bank of England. We could well have hit the bottom of the market and be on the way back up again now.”
Article from the Online Financial Reporter 12/06/2018