The number of properties being bought by landlords in order to be rented, known as buy-to-let, has fallen by almost half since last year, according to new figures from the Council of Mortgage Lenders.
The CML’s buy-to-let lending forecast has dropped, with figures now expected to be £35 billion in 2017 and £33 billion in 2018, down from December’s prediction of £38 billion for both years.
But the number of first time buyers rose 8% between April 2016 and 2017, helped by falling interest rates and the slowing growth of UK property prices.
“Remortgage activity and first-time buyers continue to drive lending this year. Looking ahead, we expect to see this trend continue, but not as strongly, as the factors supporting lending are blunted by less favourable economic conditions,” said Paul Smee, CML director general.
“Buy-to-let had a weak start to 2017, and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year,” he said.
The CML attributes the slowdown in buy-to-let purchases to the impact of tax and prudential measures, and hangover effects from last year’s change to stamp duty.
Landlords paying higher rates of tax are now experiencing a drop in the amount of tax deduction they can claim from mortgage interest each year, a measure introduced in April. This, says the CML, has made landlords more cautious about expanding their portfolios.
“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,” said Smee.
Gross mortgage lending, which reached £20.1bn in May, was up 12% both on last year’s figure and on the figure for April. But the CML is clear that the housing market has “stalled” in recent months, and predicts there could be a slowdown in the number of property transactions – typically at around 100,000 per month in 2016, but down to 65,000 in April – over the rest of the year.