UPBEAT mortgage lending figures published on Thursday do not necessarily mean the UK housing market is off the hook, Landbay’s chief executive has warned.
The Council of Mortgage Lenders reported a 19.4 per cent increase in mortgage origination in March, partly soothing fears that UK consumers’ purchasing power is being eroded by mounting inflationary pressures.
“Mortgage lending held up well in March, as borrowers continued to take advantage of the more friendly purchasing conditions with record low interest rates and loan-to-value deals,” said John Goodall, head of the peer-to-peer buy-to-let (BTL) lending platform.
“First time buyers and remortaging activity drove lending volumes up as lack of supply and stretched affordability continued to impact the market.”
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However, last April’ s hike in stamp duty surcharges on second homes and the recent tightening of tax reliefs for BTL landlords cast a shadow over future housing trends, he warned.
“The coming months may tell an entirely different story for the housing market. Following the recent changes to BTL tax relief and the introduction of tighter underwriting criteria, it is becoming even more complicated for aspiring homeowners and landlords to access the finance they need.”
The mortgage association confirmed that within March’s aggregate lending figure of £21.4bn, “there has been a shift towards first-time buyer and re-mortgage customers, away from home movers and buy-to-let landlords.”
Moreover, gross lending was still 18.7 per cent lower than in March last year, and lending figures for the first quarter marked a 4.2 per cent decline quarter on quarter and 6.2 per cent fall year on year.
“It should be borne in mind that the March 2016 gross mortgage lending data were particularly elevated as activity was lifted by BTL and second home buyers rushing to beat the April 2016 rise in stamp duty for these sectors,” said IHS Markit’s chief UK and European economist Howard Archer.
However, he warned that the growing consumer spending squeeze and elevated house price to earnings ratio will continue to pose a threat to housing market activity and house prices over the coming months.
“There are signs that housing market activity could now be stuttering after improving modestly over the final months of 2016 and start of 2017,” he added.
Bank of England figures showed a dip in mortgage approvals in February after a 10-month high in January.
“What we now need are some firm commitments from the government to tackle the housing crisis,” said Goodall. “Positive measures aimed at encouraging the development of high quality rented properties will target the lack of supply across both sales and lettings in the housing market.”