If you listen carefully that sound you can hear from those involved in the housing and mortgage markets is a collective intake of breath, as everyone involved takes stock of what has been an incredibly busy (and stressful) first three months of the year.
From a conveyancing perspective, I suspect most firms have not had to cope with the sheer volume of work that came through their channels during that last three-month period, fuelled in the main by buy-to-let landlords attempting to get their purchases through before the introduction of the increased stamp duty charges from the 1st April.
I will not need to tell agents just how busy this first quarter has been; indeed, judging by the figures already coming out for March, we have seen firms dealing with double, sometimes triple, the number of cases they would ordinarily deal with. In a very real sense, this was unsustainable and while many may have disagreed with the policy itself it is perhaps good news that the Chancellor did not use his Budget last month to provide an extension to the deadline. I would have genuinely feared for the coping strategies, and sanity, of most in the industry if this had been the case.
The figures for the last few months of activity are now just starting to come through and they show just how the stamp duty deadline impacted on the marketplace. E-surv’s Mortgage Monitor claims that the first quarter of 2016 was the busiest start to the year in nine years with 71,710 house purchase loans granted, the highest opening quarter since the end of the boom years in 2007 which had 116,898.
Council of Mortgage Lenders’ lending figures for February also reveal just how busy the buy-to-let sector has been – and I suspect when March’s data is also published we will see further growth. Indeed, February figures show that lending to buy-to-let landlords increased by almost two-thirds from February 2015 – up to 23,700 loans worth £3.7bn – a 47% rise based on volume, and 61% by value. Given the rush to complete deals before March, one can only surmise what growth we will see there.
However, the point to focus on in April is what the market is doing now and what might it deliver over the rest of the year. Given the deluge of activity in quarter one, especially in buy-to-let, we have to think that quarter two will be far quieter. With the deadline gone, there may be those who believe they can squeeze a bargain out of the market, even with the added stamp duty costs, but I wouldn’t be surprised to see landlords also taking stock and seeing how the sector reacts, especially when you consider we also have the cut to income tax relief on mortgage interest payments being introduced next year, and stricter affordability guidelines for buy-to-let lenders to follow.
That said, I’m not completely convinced there will be a flood of buy-to-let landlords leaving the market, putting their properties up for sale, to be snapped up by first-time buyers. I’m certain that the Government believe this will be the outcome of their forays into buy-to-let but the fundamental problems facing first-timers still remain regardless, those being securing the deposit, finding a mortgage, meeting the tightened affordability measures of lenders, not forgetting of course the still low levels of housing stock in this country. Hitting buy-to-let participants won’t necessarily smooth the path to homeownership for those new purchasers.
Mortgage advisers are probably looking for increased levels of remortgage business as rates are still incredibly low and there are undoubtedly large numbers of existing borrowers who could save themselves money if they took the time and effort to engage with the market. However, this doesn’t necessarily help agents, unless they are remortgaging to release equity, buy more property or help those within their family to get their own homes. That said, remortgaging has been at relatively low levels for some time, and while there has been some improvement, the fact Base Rate remains at 0.5% means some borrowers are happy to stay put.
All in all, this appears something of an uncertain time for the market. The ‘rush-to-let’ is undoubtedly over but there could still be deals to be done for landlords, even factoring in the increased stamp duty costs. We are also seeing an increase in the use of limited company vehicles to buy property, and even though this has no impact on stamp duty costs, as it stands tax relief on mortgage interest payments is still available at the higher rate within a company.
So, while some have predicted a landlord exodus to be replaced by eager first-timers this outcome remains to be seen. Perhaps it will merely be a few months of quiet reflection before the housing market wheels begin turning more rapidly – the late Spring/early Summer is traditionally a positive time for the market and I suspect that 2016 will ultimately be no different in that regard.