Buy-to-let leads June mortgage market revival

The mortgage market enjoyed a buoyant June with a resurgence in new lending and remortgaging, with buy-to-let leading the charge.

House purchase lending rose 22% month-on-month, while remortgage activity leapt by a third on May, according to latest monthly lending trends from the Council of Mortgage Lenders (CML).

The number of buy-to-let loans increased 38% over the year to 22,100 in June, while the value of loans rose 55% year-on-year to £3.4 billion. Buy-to-let now accounts for 17% of gross lending.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said buy-to-let performed strongly both for new purchases and remortgaging.

“Lenders like buy-to-let as it is easier to underwrite than residential borrowing and there are better margins.

“It remains to be seen whether the recent changes to claiming mortgage interest relief and the wear and tear allowance will have a negative impact on the sector.”

Harris expected buy-to-let remortgaging to remain strong as amateur landlords look for ways to maximise their profits.

"We expect the majority of investors will still consider buy-to-let to be a good investment and carry on regardless."

The CML figures also show little sign of lenders hiking rates in anticipation of the first base rate rise.

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said: “While a couple of high street lenders have recently increased their rates, the vast majority are offering record-low deals and there are still plenty of competitive products for borrowers to snap up.

“For example, the average two-year fixed rate at 75% loan-to-value is just 1.87%. That is 67 basis points below where it was this time last year and a price cut of 26%.”

Murphy said that given the Bank of England's latest guidance, an interest rate rise this year it seems less likely.

Jeremy Duncombe, director, Legal & General Mortgage Club, welcomed the bounce back in remortgaging activity in June after a slow start to the year.

“We’ve been working hard to raise the profile of this sector, and the important part that the broker plays in looking after their customer.

“Rates are already beginning to creep upwards after the record-lows seen in recent months as a result of the strengthening economy.”

Paul Hunt, managing director of Phoebus Software, said the remortgage market still has room for improvement.

“In April 2008, remortgage activity accounted for 62% of all mortgages. The uplift in June, although welcome, is still well below previous levels at 32%, so there is definitely the potential for further increases.”

He said the first raft of interest rate rises, predicted for early 2016, could be the catalyst for the next stage of the revival.

"It is definitely the sector within the mortgage market to watch in the coming months.”