Buy to let remortgage lending passes 2007 peak
- Published: Thursday 18 February, 2016
- Category: Housing market
- By: Ben Gosling
- Updated: Friday 08 July, 2016
Buy to let remortgage lending has surpassed its 2007 peak, whilst purchase lending is continuing to recover, according to industry data.
The latest figures from the Council of Mortgage Lenders (CML) show that gross buy-to-let lending in 2015 was at its highest level since 2007. 58.4% of this activity was remortgage lending, which was in fact greater than its pre-crisis peak.
Year on year, gross buy-to-let lending rose 39% by value and 28% by volume.
Yearly growth stunted in owner-occupier market
In the owner-occupier market, growth in 2015 was driven by loan size rather than the number of borrowers. Lending by volume for first-time buyers and home movers remained static and fell by 0.2% respectively, but lending by value to both groups increased.
But quarterly figures show an upward trend
Looking more closely, CML’s figures show a steady upward trend. CML’s director general, Paul Smee, notes that the number of purchase loans issued to owner-occupiers was at its highest level in eight years. Mr Smee remarks that the market is showing
a gradual upward trajectory… rather than rapid growth.
Buy-to-let lending followed the opposite pattern. In contrast to its start year on year growth, it actually saw a slight quarter-to-quarter drop in lending, with both the number and value of transactions falling by 1%. This could be in response to new government policies, announced in the Summer and Autumn Budgets last year, that reduce the tax relief landlords can claim and increase the stamp duty payable on buy-to-let purchases.
Buy to let
is still recovering from the financial crisis
John Heron, managing director of Paragon Mortgages, remarks:
A common accusation levelled at buy-to-let landlords is that they have an unfair advantage over homebuyers. The data released today would suggest this is not the case, with buy-to-let purchases making up only 11.6% of all purchases.
In 2009, following the financial crisis, gross buy-to-let lending fell to an absolute low of £7.9 billion, from which it is still recovering. Buy to let purchase activity made up a smaller proportion of overall purchase activity in 2015 (11.6%) than it did in 2007 (13.0%).
Despite claims of over-heating, effectively the sector is still recovering from the financial crisis, Mr Heron comments.
…if we could draw the attention of government and policy makers to any one argument this would be it.
Comment: Andrew Turner, Director of Commercial Trust
The latest figures from the Council of Mortgage Lenders demonstrate that there is potential for steady growth in both the homeowner and investor markets that could be fulfilled by a marked increase in construction.
This could stabilise the market, freeing up more affordable housing for first-time buyers, facilitating mobility for existing homeowners and encouraging both institutional and private investment where it is needed.
It would also allow for steady growth that does not need to be manipulated by short-term solutions such as help to buy, and help to create a housing market that caters to the needs of all demographics: investors, owner-occupiers and tenants alike.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.