Lloyds prepares for 2017 focus on remortgaging

Lloyds prepares for 2017 focus on remortgaging

Mike Jones, managing director for intermediaries and specialist brands at Lloyds Banking Group, expects brokers to focus on remortgaging and product transfers in 2017.

Mr Jones said while 2016 will be the year that the buy-to-let market will not forget in a hurry, a low interest rate environment in 2017 is likely to lead to a focus on remortgage activity.

Reflecting on this year, he said 2016 would be remembered for government moves to curb buy-to-let enthusiasm, as properties bought as second homes or buy-to-let incurred an extra 3 per cent stamp duty from April onwards.

Article continues after advert

Although Mr Jones said this move was unwelcome, “this extra cost may have been the calm before the storm.”

He said: "We have seen the dust begin settling in the aftermath of the inevitable March stampede as the deadline loomed, and there’s no doubt that it has impacted purchases, with a slowdown in housing transactions and a market shift towards remortgages and product transfers.

“The advent of new tax changes saw most lenders move in the last month to increase their rental coverage ratio (RCR) from the standard 125 per cent to 140 per cent or 145 per cent to cater for the increased tax liability impacting higher and top tier tax payers.

“BM Solutions recently took an innovative approach designed to reflect an individual’s tax position rather than apply a one-size-fits-all solution. 

“This has been well-received by brokers and prevents particularly basic rate taxpayers having to meet a much higher RCR unnecessarily.”

More broadly across the market, Mr Jones said the latest Halifax house price index saw the annual rate on a pretty steady downward trend since reaching a peak of 10 per cent in March. 

Heightened affordability pressures resulting from a sustained period of house price growth in excess of earnings rising appear to have dampened housing demand, contributing to the slowdown in house price inflation. 

That said, Mr Jones pointed out the slowdown in buy-to-let purchase has created space that more first time buyers have filled. 

Meanwhile, he said very low mortgage rates and an ongoing shortage of properties for sale should help support price levels‎. 

So while annual house price growth is projected to slow over the coming months, Mr Jones said there is no prospect of a slump that the more sensationalist newspapers would love to write about.

He said: “Despite curve ball after curve ball, the market has remained resilient, even under a lingering cloud of Brexit uncertainty, a seven-year low in interest rates and a dramatic US presidential election result.

“We can expect the New Year to shed further light on how the impact of this year’s big challenges will play out for the market, and how we adapt to these new regulations and processes. 

“Speculation over when interest rates will start to creep back up has begun, and European political rumblings outside the ongoing Brexit discussion will create lots of uncertainty and challenges in forecasting with confidence.