Lenders reveal extent of March buy-to-let rush

A row of terraced houses

The Council of Mortgage Lenders has revealed that lending to landlords shot up by 163% in the year to March 2016.

Landlords borrowed a total of £7.1 billion in March, 87% more than in February, meaning that one month accounted for over half of the year’s growth. The amount of activity in March meant that gross buy-to-let lending by volume for Q1 reached its highest level since the third quarter of 2007.

In total, buy-to-let loans accounted for 29% of total purchase lending. Buy-to-let remortgage activity also increased, offsetting a slowdown in remortgage lending generally.

Experts predicted the first quarter to be a busy one for landlords in anticipation of changes to stamp duty rates that took place on April 1. But lending to both first-time buyers and home movers also grew.

Lending to homeowners also reached a post-crisis peak

Lending to homeowners grew 59% by value and 45% by volume in March. Home-movers drove the bulk of this activity, borrowing a collective £4 billion more than in February. Some suggest that growing demand for one- and two-bedroom properties has enabled ‘second-steppers’ to trade up, accounting for this dramatic leap.

Lending to first-time buyers also rose, albeit only to levels last seen in December 2015. Lending was up by 32% by value and 28% by volume on the preceding month.

How has the rush affected house prices?

The latest House Price Index from Rightmove contains some surprising news.

Market analysts were expecting the stamp duty surcharge to cool demand in the market. And following a 1.4% fall in asking prices in April, it appeared to have done just that. But the dip was short-lived, and a month later the property portal has reported a 6.2% upswing.

Rightmove’s Director and Housing Market Analyst Miles Shipside blames the rise on a shortage of suitable properties. Demand for entry-level flats and houses remained high in April, while supply of these properties has seen a slight drop.

It of course remains to be seen how close to their asking prices these properties do eventually sell. Mr. Shipside notes that “there may be some over-pricing in the market”; a view corroborated by recent findings suggesting that the average seller accepts a discount of over £25,000.

The outlook for investors

That the stamp duty change prompted the March buy-to-let rush is clear. And with investors having brought forward their transactions to avoid the surcharge, a lull in April was to be expected.

But it seems the market is finding a new equilibrium as investors adjust to the changes. And the fact that some sellers are accepting large discounts should be encouraging to landlords hoping to offset their added tax costs.

Planning your next purchase

The majority of landlords pay the higher rates of stamp duty. Our buy-to-let guide will help you determine whether your transaction will fall under the new regime. The calculator below will show you how much extra you should expect to pay.

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Many transactions will still make for good investment choices, even with the added costs. But if you would like tips on ways you could offset some or all of the extra tax, the link below may be of interest.

If you are ready to proceed with your next purchase, contact us on the number at the top of this page or request a quote today.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.