Stamp duty hike leads to buy to let stampede

Quarterly statistics reveal a spike in buy to let lending, as buy to let advances hit their highest level since 2007, reaching £10bn in the last quarter of 2015, compared to £7.7bn in Q4 2014.

The increase in advances, as revealed in the Mortgage Lenders and Administrators Return (MLAR) released jointly by the Bank of England and the Financial Conduct Authority (FCA), coincided with the chancellor’s Autumn Statement when he announced plans to introduce a 3% increase on stamp duty for buy to let second homes.

The latest figures also reveal that the proportion of buy to let lending rose 1% year on year and was up from 15.6% in Q3 to 15.9% in Q4 2015.

Remaining balances on buy to let mortgages were at their highest since 2007, when the series began, representing 15% of total residential balances in the last quarter of 2015, amounting to £178.2bn.

In terms of overall house purchases, including buy to let and first time buyers, the proportion of lending was 69% in Q4 2015, 0.8% lower than in Q3 2015. In value however, gross advances were recorded as being £43.7bn, up 20% year on year.

The value of loans advanced to first time buyers increased by £2bn year on year to £13.2bn in Q4 2015, as purchases increased in the quarter by 0.5% to 21%.

Remortgage lending accounted for 25% of total mortgage transactions in Q4 2015, rising slightly by 1%.

The last quarter saw interest rates at an all time low, with the average rate falling by five basis points to 2.71% - again, the lowest level recorded since 2007.

This decrease was driven by an average decline in fixed rates of seven basis points to 2.72%, partially offset by an increase in variable rates of three basis points to 2.63%.

Fixed rate mortgage products accounted for 84% of all product types, by far the most dominant of product, increasing in popularity - up from 81% in quarter three and 82% in Q4 2014.

Affordability remained constant in Q4 2015, according to the government’s figures. Gross mortgage lending at loan to values (LTV) of more than 90% fell by 0.1% over the quarter to 3.2%.

While joint applicants borrowing more than three times their income rose slightly to just less than 1% in Q4, accounting for 30% of all mortgage applications.

Sole borrowers with mortgages of an income multiple of more than four times their salary increased by 0.5% to 10.2% of total loans.

The proportion of gross advances that were a combination of an LTV over 90% and loan-to-income multiple of over 3.5 x for single income borrowers (or 2.75 x for joint income borrowers) remained unchanged over the quarter at 2.3%.

Welcoming the increase in lending, Steve Griffiths, head of sales and distribution at Kensington, cautioned that greater diversity in lending was still required.

“There are many real life circumstances that can add complexity to a mortgage application and it is still the case that many credit worthy potential borrowers who are self-employed, contract workers, or have experienced credit events in the past, don’t think they are able to access mortgage funding.

“As our market grows, we need to make it clear that we are open for business to a diverse range of customers, not just those who tick all the boxes of a standard mortgage application.”

The quarterly report, Mortgage Lenders and Administrators Return (MLAR), is completed by regulated lenders, which include banks, building societies, credit unions and other specialist lenders, to cover all aspects of regulated and unregulated mortgage transactions.


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