CML predicts impact of buy-to-let tax tinkering

CML predicts impact of buy-to-let tax tinkering

Gross mortgage lending reached £19.9bn in November, 9 per cent lower than October’s lending total of £21.9bn, but 23 per cent higher than the £16.1bn lent in November last year, according to the Council of Mortgage Lenders.

The CML’s economist Mohammad Jamei observed that lending is set to finish the year stronger than it started, with the pace of lending recovering over the summer months.

“Reflecting this recovery, we estimate lending this year to reach £214bn, up from our earlier estimate of £209bn.

“Looking ahead, upside potential appears limited as a result of affordability pressures and new supply challenges, which will continue to weigh on activity.”

The CML also published its 2016 and 2017 forecasts, which predicted a benign domestic economic backdrop underpinning a gentle improvement in housing and mortgage market activity.

Mr Jamei expected gross lending to be supported by house purchase activity from home-owners and remortgage activity across the board.

He suggested that the government’s housing initiatives may progressively build, but will be slow to take effect over the next couple of years.

“Buy-to-let faces a challenging period, as changes to tax treatment and the prospect of macro-prudential intervention run counter to otherwise strong fundamentals,” said Mr Jamei, adding that this year’s buy-to-let house purchase activity may peak and fall away below 2014 levels by 2017.

The CML also expects limited deterioration in the underlying figures for arrears and possessions in 2016 and 2017, as the majority of borrowers cope with modest interest rate increases predicted to start in the second half of 2016.

Lending overall will be supported by house purchase activity from home-movers and first-time buyers and remortgage activity across the board.

Commenting on the gross lending figures, Kensington’s head of sales and distribution Steve Griffiths said that the nominal dip in mortgage lending, compared with October’s figures, is reflective of the seasonal fluctuations in the market in the run up to Christmas.

“That said, lending is still significantly up on last year as the combination of low inflation, low rates and rising wages has enabled more people to raise a deposit and get a foot on the property ladder.”

He added that the Financial Conduct Authority’s call for input into competition in the mortgage market “will hopefully flag the importance of a diverse market that provides different types of borrowers the opportunity to access homeownership”.

Jonathan Harris, director of mortgage broker Anderson Harris, noted that while some other indices are pointing to aggressive growth in the housing market over coming months, the CML forecasts a gentle improvement in activity.

“This is more realistic and is likely to be more sustainable - fundamentals remain strong, such as low inflation, rising wages, more jobs and competitive mortgages, which will support the market.

“However, borrowers are likely to become increasingly concerned about rate rises, particularly with the Fed finally taking the plunge and increasing rates. This will focus the minds of those who may have been delaying remortgaging and we expect more people to opt for a fixed rate in the first half of the year.”