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Buy to Let Weakness Affecting Total Mortgage Lending

February’s total gross mortgage lending was recorded at 8% less than January 2017 at £18.2 billion which has seen a £100,000 increase year on year. The Council of Mortgage lenders suggest that the current lending weakness across the UK will continue courtesy of first time buyers and existing owners remortgaging adding to the total while the number of those moving and buying to let has declined.

Fewer properties are coming to market as progressively less existing owners are bringing properties to market and this has caused an imbalance between supply and demand. The Spring Budget did not affect the housing market, aside of the ignorance shown to the Stamp Duty increase, but the number of transactions will fall across the year.

Spring is usually the commencing season for a busier property market but the struggling buy to let market will impact directly on the year’s transaction numbers. Heightened inflation and the increased Stamp Duty show the first real change in property sale taxation since 2013 and the Bank of England must react regarding the proposed interest rate increases.

Higher monthly payments are almost certain for 2017 but lenders will begin assessing their current crop of mortgages and consider pulling their cheapest mortgage deals as the interest rate increases at set to rise.

The number of buyers seeking mortgages will rise for the coming months up until a point where lenders simply cannot afford to offer low interest mortgage rates to the bulk of their prospective customer base. Even the base rate of mortgages has been driven to an all time low as a byproduct of the Brexit result which will no doubt stimulate buying in the UK but it could be short lived.

Buy to let purchasing has taken an enormous dip since Stamp Duty was amended last year and the entire property market is being hindered by the lowered mortgage rates as existing mortgage holders seek a better deal to lower their current payments.

Prices will grow unsustainably if existing owners continue to remortgage their current homes instead of considering a relocation and bringing property to market. This, combined with the predicted lending rate increases, will cause a stutter in the market as buyers and sellers become increasingly hesitant to commit to mortgages or present their property for sale.