Buy-to-let lending remains robust despite the challenges, according to Council of Mortgage Lenders

Buy-to-lending remained robust towards the end of last year despite the huge tax changes that have been introduced. Landlords borrowed £3.2 billion during December, up 10 per cent month-on-month in November, according to the latest figures from the Council of Mortgage Lenders (CML).

However, the CML figures revealed that lending is still down nine per cent compared to a year earlier.

The figures still look promising, though, as the gross buy-to-let lending increase in December made it the highest monthly level since stamp duty changes were introduced in April. Among these changes were a three per cent land tax surcharge was applied to all second homes and buy-to-let properties.

What lies ahead?

Paul Smee, director general of the CML, said: “Buy-to-let lending, driven by remortgage activity, saw its strongest monthly lending level since the stamp duty changes on second properties introduced last April.

“Despite this, we expect buy-to-let lending levels in both 2016 and 2017 to prove lower than their 2015 recent peak as further tax changes take effect.”

Over the next four years, the tax relief that landlords can claim is being reduced and eventually replaced with a 20 per cent tax credit.

Tougher mortgaging rules

Landlords have also had to face strict new affordability rules, including stress tests that ensure they can afford their loans if rates rise.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Landlords may find it harder to remortgage especially if they are looking to capital raise at the same time but there are still options in what has become a complex market.”

Mark Dyason, director of mortgage brokers Edinburgh Mortgage Advice, said: “The surge in buy-to-let remortgages is a result of landlords optimising their portfolios in advance of the new affordability regulations.

“Landlords were making hay while the sun still shone.

“Since January 1, it has become a lot more difficult for landlords to finance their properties, especially at higher loan-to-values, and so a rush to remortgage in the final months of 2016 was inevitable.”

Steve Olejnik, chief operating officer of Mortgages for Business, predicts that gross buy-to-let lending will continue to slow, but in line with expectations.

“We expect that 2017’s total will be slightly lower than 2016, but not by a significant amount.

“While the regulatory changes to property investment are challenging, the property market will continue to offer strong returns to those who take an intelligent and level-headed approach to their portfolios.”

The long-term health of buy-to-let

Rob Lankey, chief executive of the National Association of Commercial Finance Brokers, said: “What is now key to the longer-term health of the buy-to-let sector will be how well it navigates the choppy waters ahead and absorbs this tranche of regulatory changes.

“Although stress tests will mean stricter lending criteria, and investors will inevitably find it harder to access finance, this should also mean they are better placed to absorb interest rate hikes when they come, which is a ‘when’ not an ‘if’.”

How are you feeling about buy-to-let in 2017? Let us know in the comments

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