Remortgaging volumes are propping us up as some landlords lock in to a fixed rate ahead of any potential Brexit mayhem
The Council of Mortgage Lenders’ lending figures for April make pretty sobering reading for the buy-to-let industry. Landlords borrowed £2.5bn – down 65 per cent month-on-month and 7 per cent year-on-year. This equated to 16,100 loans – down 64 per cent compared to March and 10 per cent from April 2015.
While much of Q2’s purchase activity completed in Q1 ahead of the stamp duty increase, I fear the decrease in lending is down to other factors and activity may not bounce back up this year.
Clearly, pre-EU referendum nerves have had a palpable effect on landlords’ borrowing plans.
Many landlords have told us they prefer to wait until the outcome is known before making further purchases. Some with applications already in the pipeline are being slow to provide the paperwork or respond to requests for further information. I suspect that a few at least are being purposefully unhurried, preparing themselves for a hasty retreat should the Brexiteers win.
Outwardly, many lenders and brokers remain fairly upbeat about business volumes. We certainly did better than anticipated in April but, if I am honest, business in May was considerably slower and June so far is slower still. We expect to be about 25 per cent down on our targets this month.
Remortgage rescue act
Digging deeper into the figures, remortgaging volumes are propping us up as some landlords look to lock in to a fixed rate ahead of any potential mayhem.
I am sure this is the same for lenders and other brokers. Indeed, if everyone in the buy-to-let sector admitted the truth, it might just get the Chancellor off our backs.
Looking at the buy-to-let lending market as a whole, I would not be surprised if it managed only £35bn this year. That would be down £2.5bn on 2015 and way, way below the Intermediary
Mortgage Lenders Association’s prediction of £43bn for 2016. Anyone who thinks we will do more is, frankly, delusional and short-sighted. And that £35bn will be if we have voted to remain.
If the UK votes to leave the EU, however, I expect buy-to-let lending to go into a period of free fall as the Bank rate rises, house prices drop and jobs go. The fact that demand for rental accommodation continues to outstrip supply may be the industry’s only saving grace. But be in no doubt: lending to landlords will suffer.
David Whittaker is managing director of Mortgages for Business