"Following a notable shift towards lending for remortgage in the third quarter, landlords showed they were once again willing to commit to new purchases."
While remortgaging continued to account for the bulk of activity in the buy-to-let market in Q4, purchase lending returned to levels seen before Q3, according to the latest Mortgages for Business Index.
The share of lending for purchases in the vanilla BTL market grew from 28% in Q3 to 38% in Q4. Meanwhile, there was a more subtle shift in the HMO lending market, with the share of purchases rising to 26%. While this is below the level seen in Q2 2016, Mortgages for Business says it brings this part of the market back in line with the level seen before the announcement of the changes to landlords’ tax relief in 2015.
The results of the Index also show that the average loan to value ratios across all products remained stable at 67% in the final quarter of 2016. Gross yields also remain unchanged.
David Whittaker, CEO of Mortgages for Business, said: “It is encouraging to see that the share of lending for purchase in the buy-to-let mortgage market returned to normal in Q4 2016. Following a notable shift towards lending for remortgage in the third quarter, landlords showed they were once again willing to commit to new purchases. The outcome of the EU Referendum, and the subsequent macro-economic uncertainty dampened purchase lending in Q3, with many landlords initially opting for a cautious approach.
“While changes to Stamp Duty on second properties and landlords’ tax relief mean that landlords need to approach their investments intelligently, there are still excellent returns to be had in the market – especially compared to other asset classes.”