It makes no sense to tempt fate in this marketplace, and one swallow does not make a summer, but the latest CML statistics for the buy-to-let sector for January appear to show a relatively strong start to the year and one that sets decent foundations to be built upon throughout the rest of 2017.
These initial statistics certainly chime with our own experience as we motored into 2017 with plenty of enquiries, applications and activity. As you will know, it’s not our intention to hoover up as much business as possible just for the sake of it, and the strong product interest has allowed us to chose our loans carefully, underwrite them properly and to ensure, very importantly, that we continue to deliver excellent service to the broker community.
Overall, the statistics are clear on where the current balance of power lies within the buy-to-let sector right now with remortgage activity in the ascendency. During January, purchase activity was at an eight-month low, but as the CML itself said, there is always a winter lull and one suspects that the buy-to-let purchase market had its during December and January.
That said, the split is approximately two-thirds remortgage/one-third purchase and while I fully expect activity levels to increase, that split may well continue for some time. However, I also think that landlords are not stupid and they will have perhaps held their counsel until they saw what the Budget statement might have brought, particularly in terms of any stamp duty u-turn. As expected, there was nothing of the kind however you never can tell in politics and therefore lit was probably worth waiting to see what might come of it.
Add into this, next month’s tax changes on mortgage interest tax relief and you can perhaps not blame landlords for waiting a little to see how things might have played out. Now that we, and they, have some certainty around what the landscape does look like, I’m confident that overall purchase activity will improve and we can certainly attest to this holding up with our own business levels.
Those figures for January do however show how the market has shifted and reshaped itself, certainly since the introduction of the extra 3% stamp duty charge, plus of course many landlords brought forward their purchasing prior to the deadline in order to avoid the increase in costs. Last January 9,700 buy-to-let purchase loans were written; in January this year that had dropped to 5,900. Conversely, buy-to-let remortgage loans were hitting the heights of 13,700 in January last year, but were over that, up to 13,900, in January 2017.
In terms of the value of those loans, while lending hit £3.7bn in January 2016 (£1.4bn purchase/£2.3bn remortgage), this had dropped to £3bn this year – split between £0.8bn purchase and £2.2bn remortgage. Many have been anticipating an overall drop off in gross buy-to-let lending in 2017, but it’s far too early to say how the rest of the year might pan out – it depends if there is a renewed appetite for purchasing and whether remortgage activity can continue at the same pace.
As far as we are concerned the market remains sound, and as IMLA statistics showed, the level of buy-to-let enquiries received by brokers continues to increase, probably because of the greater complexity brought into the market by those lenders who have had to change their underwriting processes. We have been able to keep things simple however and believe this is appreciated by both brokers and their clients who appear on some occasions to be tip-toeing through a veritable minefield. That said, the market is competitive, appetite remains strong and it would seem landlords remain resolute and focused – let’s hope this continues.
Bob Young is chief executive officer of Fleet Mortgages