Last year could have been a potentially destabilising year of regulatory and political change for the UK mortgage market but it was resilient and adaptable and looking ahead challenges will continue in 2017.
Indeed, the Council of Mortgage Lenders (CML) does not expect much growth in 2017 even although home owner house purchase lending increased in 2016 and its latest report points out that the buy to let sector’s positive lending performance was driven primarily by remortgaging.
Overall the CML says that first time buyer lending is healthy and this sector saw lending increase by 9% in December month on month and 8% year on year while home owner lending was up 5% and 3% respectively.
Gross buy to let lending was down 15% by volume and 7% by value month on month and year on year loan volume was down 21% and the value was down 18% compared to December 2015.
Home-owner remortgage activity was up 14% by volume and 20% by value compared to 2015 which means that the number of remortgage loans was at its highest since 2009.
‘We do not expect the market volumes to show a year on year increase in 2017, instead it will remain similar to that achieved in 2016,’ said Paul Smee, director general of the CML.
The data also shows that the average amount borrowed by home movers in the UK increased to £175,000 in December from £170,900 in November, while the average home mover household income increased slightly to £55,000 from £54,800. The income multiple for the average home mover went from 3.27 to 3.32.
Experts believe that the mortgage market performed remarkably well in a year that saw stamp duty introduced for additional homes and the historic vote on leaving the European Union. ‘Buyer demand has remained strong despite annual house price growth of just over 7%, with low mortgage rates helping to maintain affordability,’ said Simon Checkley, managing director at Private Finance.
‘This level of growth in lending is not expected to be sustained in 2017, however, as while the market survived the initial shock of the referendum vote, the real challenge arguably lies ahead. That said, we can be quietly confident that the market is in good shape to take on another potentially turbulent period,’ he pointed out.
He explained that even although the buy to let market continues to struggle and be propped up by remortgage activity, for those who can access the market, particularly with a cash purchase, now is a good time to get in to buy to let.
‘The Government’s recent change in stance towards supporting tenants reflects growing rental demand. With supply of rental homes being stretched, particularly as smaller investors are forced to leave the market, yields are likely to rise,’ he said.
‘For many, however, the current market remains a challenge, with tax relief changes on the horizon and more stringent affordability checks. If the Government wants to support renters it must ensure that property investment remains a viable and attractive proposition,’ he added.
Andy Knee, chief executive of LMS, also believes that record low mortgage rates have encouraged existing home owners to remortgage and reduce their monthly repayments and families feeling a squeeze on their monthly budget should view remortgaging as a crucial method to unlock extra capital.
Steve Bolton, founder of Platinum Property Partners, would like to see more done for the buy to let market. ‘Despite lending being propped up by remortgage activity with investors able to make significant savings thanks to record low mortgage rates, buy to let purchase lending has failed to recover to the levels seen before stamp duty changes were enforced,’ he said.
‘With the Government shifting the focus away from home ownership in its recent housing white paper to recognise the importance of the rental sector, more needs to be done to encourage investment rather than deter it. But planned tax changes for April, which were introduced to level the playing field despite first-time buyer activity consistently outperforming new buy to let purchases, threaten to wipe out some landlords’ profits,’ he explained.
‘As a result, many buy to let investors will have no choice but to increase rents or leave the market, only restricting supply further. Both will drive up costs for tenants, making it harder to save up for a deposit and delaying their step onto the property ladder,’ he pointed out.
‘It’s time the Government realises that the long-term impact of its systematic punishment of landlords will be to drive down not only buy to let lending but first time buyer lending as well. The Spring Budget may well be the last chance for Government to abolish this absurd tax before it is too late,’ he added.
