The Council of Mortgage Lenders (CML) has revised downwards their December prediction of £38bn-worth of buy-to-let lending in both 2017 and 2018 to £35bn this year and £33bn the following year.
The changes were made to reflect tax and prudential burdens in the housing and mortgage markets.
At the start of this year HM Revenue & Customs reported in the last three months of 2016 it earned £519m extra from the 3 per cent surcharge payable on stamp duty for second homes.
This was from the purchase of 62,800 second homes in the fourth quarter up from 56,200 in the third quarter and 30,400 in the second quarter of 2016 with the total revenue take amounting to £1.19bn.
Higher stamp duty rates have applied to purchases of additional residential property since 1 April 2016.
It was in his 2015 Autumn Statement, then chancellor George Osborne announced a 3 per cent premium on stamp duty for buy-to-let investors and those buying second homes, aimed at raising £1bn by 2021.
CML director general Paul Smee said the figures had been revised because an expected upturn in buy-to-let lending following the stamp duty change had simply not materialised.
“This re-emphasises the case for avoiding further changes to the tax and regulatory framework until the effect of these already in train have been properly assessed,” he added.
This re-emphasises the case for avoiding further changes to the tax and regulatory framework until the effect of these already in train have been properly assessed.Paul SmeeMatthew Wyles, executive director at London-based Castle Trust, said: “We should not be surprised that hard pressed British landlords already reeling from discriminatory tax measures, hikes in stamp duty and increasingly constrained lending would halt their advance on the housing market, and these figures from the CML confirm the inevitable.
“The political no-man’s land into which (prime minister) Theresa May’s ill-fated gamble has plunged the country is the latest reason for small-time landlords to sit on their hands and no doubt we will see the slowdown continue during the rest of 2017.
“But a shake-out in the buy-to-let market was long overdue and our data suggests that canny investors are already starting to stockpile cash so that they are ready to exploit the opportunities which will inevitably present themselves in the coming months and years.
“Astute intermediaries will see this a big and exciting opportunity. We certainly do and we stand ready to help.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "It is no surprise that buy-to-let lending has been subdued as the sector is still coming to terms with various changes, such as the reduction in mortgage interest tax relief, tougher lender criteria and higher stamp duty.
"Landlords are being more cautious when it comes to expanding portfolios while others are considering whether incorporation is the sensible way forward.
‘With further Prudential Regulation Authority guidelines set to be introduced in October, there are new challenges ahead for the sector and we are awaiting detail from lenders as to how they are going to deal with these.
"The Mortgage Works has been first out of the blocks and it would be good if other lenders follow their lead and released more detail so that landlords have some clarity."
Yesterday (21 June) The Mortgage Works released more information on its approach to portfolio lending ahead of new underwriting standards.
In accordance with the Prudential Regulation Authority’s expectation of firms’ underwriting standards, which come into force on 30 September, The Mortgage Works will define a portfolio landlord as a borrower with four or more distinct mortgaged buy-to-let rental properties.
The company, which is part of Nationwide Building Society, has also announced it is investing in a new online system that will allow brokers to complete portfolio property details on mortgage applications.
These can then be validated and the results sent to the underwriting team for assessment.
The interest cover ratio will be fixed at 145 per cent, with houses in multiple occupation (HMOs) remaining at 170 per cent.
simon.allin@ft.com
