The surge in lending was driven by a dash by buyers to beat the 3% property stamp duty surcharge on additional homes that was introduced on the 01 April, according to the latest report from the Council of Mortgage Lenders.
The data also shows that lending was the highest March figure since 2007 when gross lending reached £30.9 billion.
Gross mortgage lending for the first quarter of this year was therefore an estimated £62.1 billion. This is the same level as in the previous quarter, but 39% higher than the first three months of 2015.
‘Against a backdrop of a recovering market, the substantial jump in lending in March was significantly influenced by a late surge of activity to beat the government’s stamp duty change on second properties, which came into effect at the start of April,’ said CML economist Mohammad Jamei.
‘The distortion caused by this stamp duty change appears to be larger than any previous stamp duty change we’ve seen. As a result, we expect there will be about 10,000 fewer mortgaged transactions each month in the second quarter of 2016 than would otherwise have been the case, offsetting the increase in activity seen in March,’ he added.
According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), although the initial buy to let lending rush has passed, repercussions will continue to ricochet through the market.
‘Other efforts to manage demand among landlords, like reductions to mortgage tax relief, will impact on those looking to expand their portfolios. At IMLA we expect the tax increases to spur more remortgaging as landlords look at other ways to keep costs down,’ he said.
‘However, importantly, the changes will mean the sector then shrinks, the private rental sector will continue to grow perhaps more slowly to meet the demand of a rising population, continued affordability problems and the dearth of new housing supply,’ he pointed out.
‘While the failure to constrain price rises and to build more homes has been the biggest block to increased homeownership, other factors have also taken their toll. Areas beyond the mainstream market have been less well served in the more tightly regulated environment that has emerged post-financial crisis, and more consumers are falling into this category,’ he explained.
‘For example, we have seen a substantial lift in self-employment in the last five years as the labour market has evolved, but those working for themselves have had fewer tailored financial support products to choose from,’ he added.
‘However, lenders are expecting mortgage availability to improve for these types of clients in 2016. First time buyers in particular are identified as the segment of the market with the biggest growth potential. In the near future, lending levels may look lower after the buy to let rush, but over the long term the market is moving forward on a sustainable and positive upward trajectory,’ he concluded.
Ian Thomas, director of LendInvest, believes that the Stamp Duty change means building a property portfolio is simply a much tougher financial task for would be amateur landlords.
‘Buying five properties at £150,000 each would previously have cost a landlord a total of £2,500 in stamp duty. Today those same five properties would cost a landlord £25,000, some 10 times more,’ he pointed out.
‘Things will get even tougher next year, when the changes to the tax relief available on buy to let mortgage interest begin to be phased in. That said, we believe that professional landlords that are able to buy well in strong locations will continue to thrive, through careful financial planning,’ he added.
