The surge in buy-to-let investors ahead of the stamp duty tax has helped to increase mortgage lending to a new high in February.
Council of Mortgage Lending (CML) figures show 23,400 buy-to-let mortgage loans in February 2016 up 36% compared to 16,000 a year ago.
Of the buy-to-let market new house purchases were 10,300 up 30% year-on-year and remortgage buyers of 13,100 up 61% as existing landlords take advantage of record low interest rates.
In terms of value there were £3.7 billion of buy-to-let loans up 61% over the year of which £1.5 billion was new house purchases and £2.2 billion remortgages.
Remortgage lending was the driver of increased activity representing 59% of gross buy-to-let lending whereas only 27% of homeowner lending was for remortgages.
First time buyer loans higher
Mortgage lending is higher for first time buyers with loans up 11.1% for the year to 22,000 new purchase loans over the year with home movers up 13.5% since February 2015 to 26,000 loans.
For first time buyers the total value of the loans was £3.4 billion up 21.4% for the year to February 2016 with an average mortgage value of £129,000.
Loan to value (LTV) was 83% which means average deposits were 17% of the property value. The average age of a borrower is 30 years borrowing 3.46 times their income.
These figures compare to home movers where the total value of loans was £5.3 billion increasing by 20.5% year-on-year with an average mortgage of £168,000.
Home movers have equity in their properties so the LTV is lower at 73% have a deposit of 27% for their new home. On average home movers are aged 39 years and borrow 3.21 times their income.
There is also significantly higher activity for older homeowners with equity release buyers accessing wealth in their property using a lifetime mortgage.
Buy-to-let activity to slowdown
According to Paul Smee, director general of the CML buy-to-let activity is not expected to have such a strong year-on-year growth as landlords have now completed their purchases before the tax changes in April.
From April 2016 Stamp Duty Land Tax (SDLT) for new buy-to-let properties has increased by 3% on the whole purchase value which also applies to people buying a second home.
The following table shows how this is changing:
| Property values | Standard rates | Buy-to-let rates |
|---|---|---|
| Up to £125,000 | 0% | 3% |
| £125,000 – £250,000 | 2% | 5% |
| £250,000 – £925,000 | 5% | 8% |
| £925,000 – £1.5m | 10% | 13% |
| over £1.5m | 12% | 15% |
For residential properties up to £125,000 the SDLT is zero but landlords and second homes must pay an additional 3% or £3,750.
For a property valued at £300,000 homeowners would pay £5,000 in SDLT whereas a landlord or second home buyer will pay £14,000.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything or even benefit a family member.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the mortgage cost calculators, property value tracker chart and equity release mortgage calculator.
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