Buy to Let

Buy-to-let tax leaving door open for first-time buyers

Owain Thomas
Written By:
Owain Thomas

Taxes on buy-to-let landlords ‘working’ as first-time buyers and home mover numbers soar

The government’s tax changes for buy-to-let landlords have dampened the market, and opened the door to first-time buyers, according to data from UK Finance, which shows first-time buyers and home mover numbers grew strongly in the second quarter of 2017.

UK Finance noted that home movers had their highest monthly activity levels for over a year and there was an especially high number of loans for first-time buyers.

Meanwhile, buy-to-let activity slumped between April and June.

The results were welcomed by many in the industry, although there have been calls from politicians and senior advisers to reverse the tax changes for landlords.

This appears unlikely given government policy aims to increase first-time buyers.
Homebuyers dominate

According to UK Finance (formerly the Council of Mortgage Lenders), homebuyers (which includes first-time buyers and homemovers) borrowed £34.4bn during the three months to June, up 18% on Q1 and 24% on the same period in 2016. This equated to 183,300 loans, up 16% on Q1 and 9% on Q2 2016 respectively.

Homemovers were the biggest gainers of this swing away from buy-to-let, borrowing a total of £19.6bn, up 19% on Q1 and 21% year-on-year, from 92,200 loans, up 17% on Q1 and 13% respectively.

First-time buyers borrowed £14.8bn, which is up 18% on last quarter and 10% on Q2 2016, from 91,400 loans, which is a rise of 15% and 6% respectively.

These groups saw particularly strong performances in June, both borrowing 26% more than in May with a similar increase in the number of loans.
Remortgage and buy-to-let dips

Remortgage activity fell in the second quarter by 11% compared to the first three months of 2017 to a total of £16.9bn, from 96,900 loans (down 12% on Q1). Both these figures were broadly in line with Q2 last year.

Buy-to-let lending totalled £8.4bn (down 6% on Q1) from 55,400 loans (also down 6% on Q1). Both these figures were 5% up on Q2 2016, but this period was the slump following the spike in buy-to-let sales during spring 2016.

UK Finance head of mortgages Paul Smee said the June figures showed a busy month in the mortgage market.

“Buy-to-let activity remains subdued compared to its 2015 peak but consistent month-to-month since the Stamp Duty changes in April 2016.

“But there are also signs of a softening market and we are not anticipating that this performance will be sustained in the second half of 2017.

“A slightly lop-sided market could well show some growth in house purchase lending but alongside reduced remortgage and buy-to-let activity,” he added.