The number of mortgages taken out by landlords buying new properties plummeted by 85% in April, following the introduction of a new stamp duty rate on second homes.
Figure from the Council of Mortgage Lenders (CML) showed 4,200 buy-to-let loans were taken out for purchases during the month, worth £600m.
Borrowing by landlords purchasing properties spiked in March as investors tried to complete deals before new rules on stamp duty came into effect on 1 April. Since that date, buyers of any kind of residential property other than their main home have had to pay a three percentage point surcharge.
The CML’s data shows that there were 28,700 loans for buy-to-let purchases in March. The figures show a 51% year-on-year fall in activity, from 8,600 loans in April 2015, suggesting that landlords brought forward activity to beat the new tax rate.
The value of buy-to-let purchases loans was also down by 50% year-on-year and by 86% month-on-month.
Paul Smee, director general of the CML, said: “There is a sense of calm after the storm this month, as lending eased back, following thesignificant rises in activity in March as borrowers looked to beat the second property stamp duty deadline.
“We expect the market to take several months to return to its previous levels after the lending surge.”
The CML said the numbers of first-time buyers and movers taking out mortgages had also fallen over the month, although first-time buyer loans were up on April 2015’s figure.
Some 25,100 first-time buyer mortgages were advanced during the month, a fall of 9.1% on March’s figure, but up 6.8% on the previous April. Movers took out 22,200 loans, a 46% drop on March and 15% below April 2015.
In total, owner-occupiers borrowed £8.1bn for house purchases, down 40% month-on-month and 4% year-on-year.
“The stamp duty change on second properties that came into effect on 1 April resulted in activity across the market being brought forward into March causing an expected slowdown in April’s lending figures in the aftermath,” the CML said.
Howard Archer said the slowdown in lending “clearly reflected a marked waning of interest from the buy-to-let and second home sectors” following the rush to beat April’s stamp duty increase, but may also reflected “heightened concerns” over the economic outlooks.
“The strong suspicion is that housing market activity will be pressurised in the immediate term by a combination of weakened interest from the buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook, particularly in the run-up to June’s referendum on EU membership,” he said.
“Consequently, house prices are likely to be soft for the next few months.”
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