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Landlord Borrowing Soars in Buy-to-Let Boom

Industry Insight March 14th, 2016
Landlord Borrowing Soars in Buy-to-Let Boom

Landlord borrowing overtakes first-time buyer lending for the first time on record since records started in 2013.

Industry figures have shown that landlord borrowing for buy-to-let mortgages increased by 42% in January to £3.7 billion according to the Council of Mortgage Lenders. While the majority was for remortgaging, £1.4 billion was for house purchases, representing a 40% increase on January 2015. Buy-to-let loans numbered 23,100, while first-time buyer loans numbered 21,400.

This is the first time landlord borrowing has overtaken first-time buyer lending since records began in 2013. By analysing other forms of data, experts have estimated that it is the first-time landlord borrowing has exceeded first-time buyers since 2008. These figures demonstrate that the economy is tending towards pre-recession levels, particularly in the property sector.

Experts believe that these rates are higher due to the stamp duty changes in April. Buy-to-let investors are rushing through purchases before they can get affected by the additional charges on second home buyers. The surcharge starts at 3% for second properties, but accumulates depending on the value of the property, with 3% being added at each tier. At the most expensive tier of property, stamp duty will be 15% higher than it is currently.

The Royal Institution of Chartered Surveyors (RICS) have stated that they expect a drop-off in sales as the deadline becomes closer as investors realise they do not have the time to make the purchase before the charge is implemented. RICS current chief economist, Simon Rubinsohn, said: “Over the past three months, we have witnessed a surge in buy-to-let activity.”

It is believed that the market will cooldown after the surcharge comes into effect. Demand for second-homes may be slightly reduced, as investors seek to consolidate their current portfolios, which any investors have recently expanded. In the longer-term, it is believed that the housing market will moderate once the rush is over and the investors have adjusted to the tax changes.

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