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Gross mortgage lending for March at £20.5bn


According to the latest UK Finance Update on Lending report, gross mortgage lending for March 2018 is £20.5bn, a 2.3 per cent decrease on the same time last year.


The Office of National Statistics (ONS) recently reported that the Consumer Price Index (CPI) 12-month rate had dropped to 2.5 per cent in March 2018, which had decreased from 2.7% in February 2018. According to the ONS, the decrease in rate is primarily due to prices for clothing and footwear rising by less than a year ago.

Unemployment sits at 4.2 per cent according to the ONS; there were 32.34 million people in work in March, which is 396,000 more than a year earlier.

UK Finance reported that credit card spending grew at a rate of 5.8 per cent over the year, while repayments outstripped new lending in the first quarter of 2018.


  • In April, James Brokenshire was appointed as the new Secretary of State for Housing, Communities and Local Government.
  • Following his appointment, Brokenshire tweeted: “Honoured to have been asked by the Prime Minister to serve as Secretary of State at the Ministry of Housing Communities & Local Government. Looking forward to taking the government’s agenda forward especially on building the homes our country needs.”
  • Former Northern Ireland secretary James Brokenshire has been appointed to this role after Sajid Javid was named Home Secretary following Amber Rudd’s resignation.


The UK’s gross mortgage lending is estimated at £20.5bn, 2.3 per cent lower than the same time last year. UK Finance cited a 15 per cent decline in the number of total mortgage approvals, with house purchase approvals falling by almost 21 per cent, compared to a year earlier.

Eric Leenders, Managing Director, Personal Finance at UK Finance commented: “There was a rising trend in mortgage approvals for the first three months of 2018 although the number is slightly lower than the same period in 2017. March figures show that consumer borrowing was fairly modest.”

Henry Knight, Managing Director, Springtide Capital commented: “Despite March’s figures showing a slowdown in mortgage lending, the quarterly figures indicate a more positive trend with some encouraging movement in the market. Ahead of the spring period we expect to see a stable market, although ongoing sentiment may depend on any further interest rate rises.”


UK’s mortgage market off to a flying start in January with a 9.7 per cent boost in mortgage lending

According to the latest UK Finance Update on Lending report, the UK’s mortgage market has had a great start to the year, with January’s gross mortgage lending sitting at an estimated £21.9bn.


The Office of National Statistics (ONS) recently reported that the Consumer Prices Index (CPI) 12-month rate remained unchanged at 3.0 per cent in January 2018. The lack of change has been primarily down to a reduction in prices of motor fuel, which rose by less than they did a year ago; this has offset an increase in the prices of other goods.

Unemployment rose to 4.4 per cent according to the ONS; there were 32.15 million people in work, which is still 321,000 more than a year earlier.

UK Finance reported that credit card spending rose slightly in January, sitting 5.8 per cent higher than in January 2018.


The UK’s gross mortgage lending is estimated at £21.9bn, almost ten per cent higher than the same time last year. Although UK Finance is yet to release the breakdown of mortgage lending, the increase is likely to be down to the continued strength of first-time buyer and re-mortgage activity, which is reinforced by Eric Leenders’s statement on customers taking advantage of competitive mortgage deals.

Eric Leenders, Managing Director, Personal Finance at UK Finance said:

“January saw higher levels of repayments on credit cards, which is expected at this time of year as customers pay off their festive spending. Meanwhile, households were careful with their outgoings as wage growth remains below the inflation rate.

“Gross mortgage lending in January increased by almost 10 per cent compared to the same period last year, and was higher than the monthly average, as customers took advantage of mortgage deals on offer at the end of 2017.”

Henry Knight, Managing Director, Springtide Capital commented: “It’s good to see a positive start to mortgage lending in January, with an almost ten per cent increase compared to the same time last year. We’ve also seen this trend at Springtide Capital, with competitive mortgage deals providing existing borrowers with the opportunity to re-mortgage; Government incentives also encourage continued first-time buyer activity.”


Property hotspots for London’s commuters

According to a recent Homes & Property article, there are 20 property hotspots that are now serious contenders for London’s commuters.

With Surrey, Hertfordshire and Kent frequently popping up in the list of favourites, commuters are choosing these beautiful towns and more affordable homes, which are less than an hour away from London.

Haslemere, Woking, Salford and Dorking in Surrey

With its pretty streets, good educational choices and a short trip to London, areas like Dorking are quickly becoming a viable option for those who need to travel to London for work. Surrey offers great value for money. With an estimated average property price of £485,360, and under an hour (51 mins) away from London, Dorking has all of the beauty without the price tag.

Sawbridgeworth, Kings Langley, Letchworth, St Margarets and Hemel in Hertfordshire

Benefitting from a delightful town with a coffee shop culture and the picturesque River Stort, Sawbridgeworth’s properties average out at £363,908. At the more affordable end of the scale, this Hertfordshire town is also a slightly shorter commute of 40 minutes into London. Many local schools have achieved an ‘outstanding’ Ofsted report, making this town an excellent choice for families.

Charing, Rochester and Borough Green in Kent

Sitting at the slightly higher average property price of £512,218, Charing in Kent is still more affordable than living in the city. It’s easy to see why Charing is appealing, sitting on the edge of the Kent Downs and with a town that has period charm – it offers the best of both worlds. Kent’s grammar schools are known for their popularity, and Charing can still be reached in 54 minutes from London.

Other hotspots include Grays and Southend-on-sea in Essex, Newbury in Berkshire, Princes Risborough, Monks Risborough and Marlow in Buckinghamshire, Fleet in Hampshire and Hassocks in Sussex.

Henry Knight, Managing Director, Springtide Capital commented: “The outskirts of London can offer those working in London a feasible commute while providing them with much more property for their money. A sizeable house in one of these popular towns can often be less than the price of a flat in London. If a mortgage applicant can lower the loan-to-value to 60% or less, they will also find themselves in a position to be offered some of the best mortgage rates on the market – reducing their monthly mortgage payments even further.”


Renovation versus return

Whether you are considering purchasing a property that requires renovation, adding an extra bathroom or converting a garage, cellar or loft space – it pays to know which investment will yield the greatest return on investment.

At Springtide Capital, we work closely with lenders and estate agents; we understand that deciding how to invest your money and make the correct decision can be tricky. Nationwide Building Society’s survey provides rough guidance on the returns that could be expected from different types of work, which we hope will help you to make a decision.

The percentages here are an indication and will fluctuate dependant on a number of factors including area, property type, market and demand for that type of property at the time of sale.

Source: Nationwide Building Society

  1. A cellar conversion

Converting a cellar into a habitable space will increase the floor area in your property, potentially increasing its value by 5-11%; and if you don’t have a cellar, then you can always employ a professional company to dig.

It’s worth finding a cellar-conversion specialist for the job, as special systems are often put in place to consistently remove moisture from the walls and leave a gap between the exterior and interior walls. Although cellar conversions are usually classed as ‘change of use’, which is permitted, any structural changes require planning permission, so it’s best to check before commencing work.

It’s advisable to consider the cost per square foot versus the house price per square foot before commencing any work, so you can ensure you’re increasing the value of the property.

  1. Converting a garage

The majority of homeowners in the UK do not store their car in their garage, and this unused space can be an ideal way of creating additional space for growing family or renovating a property to re-sell.

You’ll need to check whether the garage walls are suitable for the new purpose, and adding a two-storey extension often requires the garage to be removed, new foundations to be put in place and re-built. An existing garage conversion is usually a permitted change but consult with your local planning department before commencing any work.

  1. Add one or two bedrooms plus a bathroom with a loft conversion

By far one of the least intrusive conversions is re-modelling the loft space: scaffolding is usually used to provide access to the roof for the entire conversion (in as little as six weeks). A skilled architect will carefully plan the space, stairs and light to maximise the usable space. There is an opportunity to add one or two bedrooms and a small bathroom in most loft spaces.

Planning permission is not usually required. However, you should consult your local planning department to check, as Dorma extensions in conservation areas do require planning.

Henry Knight, Managing Director, Springtide Capital commented: “Renovating a property that is structurally sound can yield a good return in most cases; we often work with property owners to obtain funding to renovate or extend a property. You may need a valuation to demonstrate that value will be added to the property, have a good credit rating and satisfy affordability criteria to obtain approval.”

One of Springtide Capital’s dedicated mortgage consultants would be happy to discuss any projects you may have that require additional funding; you can call us on 020 3040 4400.


Mortgage lending reached £20.2 billion in December

According to the latest UK Finance Update on Lending report, December’s mortgage lending figures reached £20.2 billion, which shows gradual improvement.

Other highlights included:

  • First-time buyers have helped to improve mortgage lending figures.
  • Credit card spending has decreased slightly.


The Office of National Statistics (ONS) recently reported that the Consumer Prices Index (CPI) 12-month rate had dropped back to 3.0 per cent in December 2017, a 1 per cent decrease from November 2017. The decrease has been primarily down to a reduction in prices of airfares and recreational goods including games and toys. However, it’s likely that the Monetary Policy Committee (MPC) will see this as a result of increased lending rates, which aims to stem inflation.

Unemployment sits at 4.3 per cent according to the ONS, who also state that between September and November there were 32.21 million people in work, an increase of 102,000 from the previous quarter.

UK Finance reported that credit card spending had decreased slightly in December 2017, sitting at 5.3 per cent.


UK mortgage lending reached £20.2 billion in December, which is 1.2 per cent higher year-on-year. The continued improvement in mortgage lending is due to increasing numbers of first-time buyers being able to purchase their first home.

Eric Leenders, Managing Director of Personal Finance at UK Finance said: “December is traditionally a quieter month for mortgages, although the underlying trend of increased numbers of first-time buyers, supported by government initiatives such as Help to Buy, continues. Mortgage rates remain low, driven by a competitive market, so customers should shop around for the best deals.”

Prior to December’s mortgage lending report, UK Finance reported in its Mortgage Trends Update that in November there were 34,800 new first-time buyer mortgages, which is 15.2 per cent higher year-on-year.

Other statistics from the November report included:

  • The average first-time buyer is 30 and has an income of £40,000.
  • There were 36,200 new home mover mortgages, which is 16.8 per cent more year-on-year.
  • The average home mover is 39 and has an income of £54,000.
  • There were 38,400 new homeowner remortgages, which is 8.5 per cent more year-on-year.
  • There were 6,600 new buy-to-let purchase mortgages, which is 1.5 per cent lower year-on-year. There were also 13,500 new buy-to-let remortgages, 3.6 per cent lower year-on-year.

Henry Knight, Managing Director, Springtide Capital commented: “Although the figures released show a somewhat subdued housing market, particularly in the London region, there are signs of a gradual improvement in mortgage lending. It is particularly positive to see first-time buyer figures increasing, which is vital to keep the housing market moving in an upward trend, reflecting historically low interest rates and a competitive marketplace.”


Housing highlights from the Autumn Budget 2017


Of the 25 key elements of the Government’s Autumn Budget, there are three areas that are set to boost the housing sector by helping first-time buyers, building more homes and boosting skills in the construction sector – ‘no silver bullet solution’ but a step in the right direction.

Image source: BBC

The key areas included:

  • The Chancellor has promised £44bn in capital investment to boost the housing market and
  • 300,000 homes to be built every year by mid-2020s;
  • Mr Hammond has abolished stamp duty for all first-time buyers (FTB) for homes up to £300,000.

Abolishing stamp duty for FTBs

Any incentive that helps first-time buyers to purchase their first property is welcome, however, the previously mentioned £5,000 saving announced by the Chancellor is more likely to be £1,660 as detailed in the official Budget documentation. Why? Because the average first-time buyer across the UK will not be able to purchase a property at £300,000. Londoners, however, are used to far higher property prices for a one or two-bedroom property and will most likely feel the benefit of a £5,000 saving.

According to the Government, 95% of first-time buyers who pay stamp duty will benefit. First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000; they will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property; with 80% of people buying their first home paying no stamp duty. There will be no relief for those buying properties over £500,000.

300,000 new homes a year

The Chancellor is injecting funds to support the home building industry, specifically helping those businesses that are not already dominant in the sector. Mr Hammond pledged £15.3 billion in new financial support for house building over the next five years – taking the total to at least £44 billion. This includes £1.2 billion for the government to buy land to build more homes and £2.7 billion for infrastructure that will support housing.

In addition, the government will also create five new ‘garden’ towns and make changes to the planning system to encourage better use of land in cities and towns. This means more homes can be built while protecting the green belt. To address the UK’s vacant property issue, the Government announced an increase in the maximum empty home Council Tax premium to 100%.

£64 million for construction and digital training courses

One of the biggest challenges faced by the construction industry is a skills shortage, which is why a new pledge of £34 million towards teaching construction skills like bricklaying and plastering, and £30 million towards digital courses using AI will be more than welcome.

This funding is provided in advance of launching a National Retraining Scheme that will help people get new skills. It will be overseen by the government, the Trades Union Congress (TUC) and the Confederation of British Industry (CBI). They will decide on other areas of the economy where new skills and training courses are needed.

Henry Knight, Managing Director, Springtide Capital commented: “It is good to see further support for the housing industry, specifically digging deeper into the fundamental issues facing the construction industry. The abolishment of stamp duty land tax for first-time buyers purchasing a property up to £300,000 is another positive move, and contrary to some opinions, I can’t see it impacting house prices dramatically.”


Gross mortgage lending 14% higher year-on-year


According to the latest UK Finance Update on Lending, gross lending is estimated at £23.1 billion for October, 14% higher than a year ago.

Other highlights from the report included:

  • £15.3 billion was lent by High Street banks
  • 7.1% credit outstanding


The UK has experienced a muted first half of the year, and the same can be said of the second, with growth at 0.4%. However, the unemployment rate remains low at 4.3%.

As predicted, inflation reached 2.8% in October, however, according to UK Finance, “inflation is likely to peak in October, before starting to fall.” Consumer spending continues to feel the pinch as wage packets are squeezed with higher prices and lack of wage growth: with households trading down and focussing on essential purchases.

The Monetary Policy Committee met on 2nd November and decided to raise interest rates by 0.25% to 0.5%; this has meant the withdrawal of historically low-rate deals.


Remortgage activity and first-time buyers have been the main contributors to October’s mortgage lending, with an estimated £23.1 billion borrowed, an increase of 14% year-on-year. Two-thirds of money borrowed was from High Street banks, at £15.3 billion.

Outstanding credit grew slowly in October, sitting at 7.1%.

Commenting on the data, UK Finance’s Senior Economist Mohammad Jamei said: “The anticipated bank rate rise saw a flurry of remortgage activity as many homeowners took advantage of the competitive rates on offer. Borrowing was also boosted by stronger first-time buyer activity as this segment reaped the benefits from good credit availability, lower rates and government housing schemes.

“In terms of saving, consumer deposits grew at a slower rate in October, while businesses have continued the trend of bolstering their cash reserves amidst a cautious business landscape due to Brexit uncertainties.”


Landlords with four or more mortgaged buy-to-let properties will now be classed as ‘Portfolio Lenders’ and subject to a different and more rigorous assessment when applying for a buy-to-let mortgage.

Lenders are now responding to rules given by the Bank of England’s Prudential Regulation Authority (PRA), which is enforcing stricter stress testing for Portfolio Landlords to ensure affordability, by introducing new systems and more complicated underwriting processes. Lenders will now need to assess the financial viability of every property in a landlord’s portfolio when deciding whether to offer them a loan. Landlords will need to show mortgage details, cash-flow projections and business models for every property they own when applying for a new loan.

When Portfolio landlords apply for new borrowing or to remortgage, they will need to ensure that each property’s monthly rental income covers 125% of their mortgage payments, which is stress tested at an interest rate of 5.5%.


  • The Chancellor has promised £44bn in capital investment to boost the housing market and
  • 300,000 homes to be built every year by mid-2020s;
  • Mr Hammond has abolished stamp duty for all first-time buyers for homes up to £300,000,
  • and there are plans to allow councils to charge a 100pc premium on council tax on empty properties.

An overview of the key housing market changes announced in the budget can be found here.

Henry Knight, Managing Director, Springtide Capital commented: “There has certainly been a ‘flurry’ of activity due to the predicted rate rise, with homeowners looking to secure favourable rates. The Chancellor’s plans to address the housing shortage are promising, as is the removal of stamp duty tax for first-time buyers up to £300,000.

“I’d like to stress that it’s essential that Portfolio Landlords understand how they will be affected by the new PRA rules; and which lenders are best suited to provide their buy-to-let funding. I would recommend that Portfolio Landlords seek advice from a buy-to-let mortgage consultant.”


Housing market shows rebalancing across regions


According to the latest UK Finance report, gross mortgage lending is estimated at £24.2 billion, with the market rebalancing in the North of the UK.

Highlights from the report included:

  • Housing market continues to grow modestly, dominated by first-time buyers
  • There is evidence of rebalancing across regions
  • Of the £24.2 billion in estimated mortgage lending, £13.2 billion was lent by High Street banks 


Despite high levels of employment, with yet another 1% decrease in unemployment (now 4.3%); economic growth is slowing, with wage growth at 2.1%.

A lack of wage growth, combined with inflation running at 2.9% in August, has resulted in workers reducing savings and being more conservative with their spending. It is predicted that this will rise to 3% in October and then fall slowly after that.

As inflation rises, the Bank of England Monetary Policy Committee (MPC) may see fit to introduce modest monetary tightening in the form of a 0.25% base rate change. With already tightening budgets, this may propel home owners to secure the current and more favourable mortgage deals through their mortgage consultant.


A slowdown in the economy can also dampen the housing market. However, 12-month averages remain in line with predictions, showing activity that resembles 2015 figures, according to UK Finance. Despite economic challenges, lending sits at £24.2 billion in August.

First-time buyer activity continues to grow, owing to the various Government schemes and the appetite for new-build properties. This is, however, not the case for home movers, whose lack of help from schemes and shortage of available property discourages them from selling.

Buy-to-let still suffers from changes to tax and remains flat, however, remortgage activity among home owners is still increasing, as rates remain competitive.

According to UK Finance, there is also evidence to show that there is a shift away from London, with the North of England, Wales and Scotland showing signs of stronger housing activity. This may be due to affordability challenges, making outer London areas more appealing. UK Finance also identified that of the £24.2 billion in estimated lending, £13.2 billion was lent by High Street Banks.


The housing market currently has a number of Government schemes aimed at stimulating certain areas of the market, all of which will end at some point and new ones launched. According to the UK Finance report, the Bank’s MPC minutes showed the committee voted unanimously to close the drawdown period for the Term Funding Scheme on 28 February 2018, as planned when the scheme was originally introduced back in August .”

In addition, the report also confirmed that buy-to-let landlords with a portfolio will be subject to stricter rules when they apply for a new buy-to-let mortgage, where underwriters (those who make the final decision on a mortgage application) will look at the risk of funding them. Although not set in stone, they will look at a landlord’s experience and how profitable they are with their existing properties. The report confirmed the date of 30th September 2017 for implementation.

Henry Knight, Managing Director, Springtide Capital commented: “As wallets are squeezed with inflation, low wage growth and the rumour of an interest rate rise, it’s a good time to review your mortgage with a consultant. The mortgage market is extremely competitive at present.

“Notably, the gross mortgage lending figures show that only £13.2 billion was lent by High Street banks, perhaps demonstrating what we see at Springtide Capital, that specialist lenders are sometimes better placed to fund some clients and their individual circumstances.”

For more information, please visit or call 020 3040 4400.

First-time buyer demographics have changed


The latest report from the English Housing Survey (EHS), shows a shift in first-time buyer demographics: revealing a distinct change in the age, deposit size and source of deposit finance compared to a decade ago.

Highlights of the survey include:

  • One in five (21%) first-time buyers were aged between 35 and 44 years in 2015-16, up from 16% in 2005-06
  • In 2015-16, three-quarters (74%) of first-time buyers were couple households, a marked change from 2005-06 (66%)
  • Over the same period, the proportion of first-time buyer households with dependent children increased from 23% to 37%
  • Two-thirds of first-time buyers pay a deposit up to 20% of the purchase price, 29% getting help from their family (up from 22% ten years ago)

Source: English Housing Survey (2015-16) 

Research paints a different picture of first-time buyers

The EHS research paints a very different picture of the journey that some first-time buyers may go on when compared to ten or twenty years ago. By understanding these changes and the attributed factors, we can see why the knowledge, experience and guidance of mortgage consultants have become more valuable than ever before.

In 1995, around 20% of first-time buyers were aged 16 to 24. They may have raised funds for their deposit on their own, have submitted a single mortgage application, and they may not have had children at the time of purchasing their first home.

Fast forward to the findings from 2016 EHS, and you’ll find that there are fewer youngsters able to afford a house in the 16 to 24 age bracket. First-time buyers could be slipping into the 25+ bracket as it takes longer to save the level of deposit now required for their first home – house price growth has been outpacing income growth for more than twenty years. As a 25+ mortgage applicant, they may also be a couple and have children.

The hard facts

According to the EHS, Londoners are choosing to raise a deposit of up to £94,088 (mean value) to secure a favourable mortgage rate on their first home, with 29% turning to family to help raise funds ­– a 7% increase in a decade.

While working hard, saving even harder and raiding the bank of Mum and Dad, 74% of first-time buyers will have teamed up with another person and 37% will have children before they buy their first home ­­­– 8% and 14% higher respectively since 2006.

The EHS also found that those purchasing their first property were in the two highest income bands, now accounting for nearly two-thirds (66%) of first-time buyers, compared with 58% ten years ago.

How does this affect a mortgage application?

A mortgage consultant needs to take all of the changing demographics and factors into account, and Springtide Capital is no different.

A joint application, an older applicant, a larger mortgage and having children impacts affordability. A joint application, for instance, increases the amount of evidence of income required, but equally, it increases the chances of funding with two incomes instead of one. The age of the applicant and the period in which they require the mortgage is reflected in the affordability of monthly payments, as is the age restrictions and period of mortgage allowed by lenders.

The affordability of funding for a house (prices having outpaced income for many years) and the costs of running a household with children also needs to be considered. All this has to be reviewed by an experienced mortgage consultant, who not only works out the affordability but also the correct lender to suit an individual’s needs – it’s become more of a balancing act.

Henry Knight, Managing Director, Springtide Capital commented: “First-time buyers are an essential cog in the housing market machine: without them, the market slows – they allow existing property owners to release equity and re-invest in the housing market. At Springtide Capital, we pride ourselves on understanding a changing market and identifying which product and lender are suitable for each applicant.”

Two months to buy-to-let regulatory deadline


Landlords brace themselves for more regulation and mortgage brokers expect an influx of new buy-to-let mortgage applications before the deadline.

Some time ago, the Prudential Regulation Authority (PRA), part of the Bank of England, announced that it will start to enforce stricter rules for lenders who are assessing a new buy-to-let mortgage for a landlord who already has four of more properties. The PRA gave a deadline of 30th September 2017, which is now approaching.

An ideal time to review your buy-to-let mortgages

The CML reported that there has been a slight increase in loans taken out on fixed terms of 5 years or longer, which are exempt from PRA stress testing requirements coupled with more bespoke underwriting criteria based on a variety of factors which may include property characteristics, the landlord’s existing portfolio, and the landlord’s tax bracket, in addition to standard interest cover ratio thresholds. CML expect to see £35 billion in buy-to-let mortgages in 2017 and £33 billion in 2018.

Henry Knight, Managing Director, Springtide Capital said: “It’s an ideal time to review the mortgage terms on a buy-to-let portfolio and secure a rate, where circumstances fit, that enables the landlord to maximise security whilst not compromising too much on the yield. As one of London’s leading buy-to-let specialists, we have the knowledge, expertise and lender relationships to help landlords through this regulatory change.”

The facts

The PRA’s supervisory statement outlines minimum expectations that firms should meet in underwriting buy-to-let mortgages, specifically:


  • Affordability assessments should take into account: borrower’s costs including tax liabilities verified personal income (where used by the lender) and possible future interest rate increases. When setting the expectations for future interest rate increases, the PRA reviewed the prevailing standards in the industry and considered the impact of changes in interest rates, and calibrated the stressed rate accordingly.
  • Lending to portfolio landlords (defined by the PRA as being those with four or more mortgaged buy-to-let properties) should be assessed using a specialist underwriting process.
  • The PRA wishes to clarify that the provision in Capital Requirements Regulation (CRR) which reduces the capital requirements on loans to small and medium-sized enterprises by around 25% should not be applied where the purpose of the borrowing is to support buy-to-let business.
  • An implementation timeline of 1 January 2017 for the more straightforward changes, and 30 September 2017 for the remainder.
  • Allowing firms to assume reasonable rental increases when assessing affordability in the context of possible future mortgage interest rate increases.
  • Excluding those re-mortgaging (and not increasing borrowing) from the supervisory statement, in a similar way to residential lending.
  • Reflecting the change to mortgage interest tax relief announced by HM Government in 2015, which has already led to several firms increasing their interest cover ratio affordability thresholds. The PRA has reaffirmed its expectation that firms should also take these new costs into account when assessing affordability.

A buy-to-let market update

According to the Council of Mortgage Lenders (CML), the buy-to-let market had a weak start in 2017, contributing to an overall fall in lending of this type in the last 12 months. Although competitive mortgage rates are available, the tax and prudential measures have placed considerable pressure on the market.

CML added: “From April 2017, landlords who are higher rate taxpayers will see a progressive reduction in the tax deduction they can claim from mortgage interest each year, the first stage of a four-year transition. We have not yet seen any sudden contraction in lending as a consequence, but it will make landlords more cautious and is likely to restrict their ability to re-leverage their portfolios. Signs of this have been evident for some months, with fewer landlords releasing equity when they refinance.

“Since January, the Prudential Regulation Authority (PRA) has required lenders to stress test new lending by either 5.5%, or 2% above the pay rate, whichever is higher. Lenders had already prepared for this, and in some cases applied the stress tests in advance of the deadline. This makes it more difficult to sustain a highly-leveraged buy-to-let business model, with negative repercussions in regional markets with low rental yields such as London.”