Buy-to-let lending plunges in April after higher stamp duty, CML reveals

Landlords borrowed less in April following the introduction of higher stamp duty on buy-to-let and second home purchases.

The Council of Mortgage Lenders (CML) said buy-to-let mortgages plunged 85.4% to 4,200 in April to a total of £600m compared to a month ago.

Buy-to-let investors had rushed to buy properties in March to beat the three percentage point increase in stamp duty on 1 April with banks approving 28,700 loans worth £4.3bn to landlords in March.

The number of first-time buyer loans also fell in April, down 9.1% to 25,100 on the previous month. First-time buyers borrowed £3.9bn in April, an 11.4% fall on March.

Loans to second home buyers in April dropped 46.2% on the month to 22,200 and were worth £4.3bn, marking a 53.3% decrease compared to the prior month.

In contrast, remortgage lending grew 25% month-on-month to a total of £6bn in April on the back of a 23% increase in the number of loans to 34,800.

“There is a sense of calm after the storm this month, as lending eased back, following the significant rises in activity in March as borrowers looked to beat the second property stamp duty deadline,” said Paul Smee, director general of CML.

“We expect the market to take several months to return to its previous levels after the lending surge.”

Howard Archer, chief UK and European economist at IHS Global Insight, said the decline in mortgage lending may have also been affected by heightened concerns and uncertainties over the UK economic outlook.

“The strong suspicion is that housing market activity will be pressurised in the immediate term by a combination of weakened interest from the buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook, particularly in the run-up to June’s referendum on EU membership,” he said.

“Should the UK vote to stay in the EU in next Thursday’s referendum, we would expect housing market activity to regain limited momentum in the latter months of 2016 as reduced uncertainty supports a pick-up in economic activity. High employment, decent purchasing power and the probability that interest rates will not rise for some considerable time to come (and highly unlikely in 2016) should underpin house buyer interest.“

Britain votes on its EU membership in a referendum on 23 June.