House purchase lending soared at the beginning of the year, thanks in no small part to the stamp duty surcharge that kicked in at the start of April. As a result, landlords and second-home buyers rushed to complete sales ahead of the deadline – and as predicted, lending has dramatically fallen now that the tax hike is in place. Except in the remortgage sector, that is…
The figures, from the Council of Mortgage Lenders (CML), show that the value of house purchase lending totalled £8.1bn during April, a drop of 40% on a monthly basis and down 4% year-on-year, with the number of mortgages advanced (47,300) following a similar pattern (down by 31% and 5% respectively).
Essentially, this means that far fewer home-buyers took the plunge in April, and this can be seen across the market: homemovers borrowed £4.3bn, for example, down 53% from March and a drop of 14% compared with a year previously, while first-time buyer lending (£3.9bn) fell by 11% on a monthly basis, despite marking an increase of 15% compared with April 2015.
However, it was buy-to-let (BTL) lending where the sharpest downturn can be seen, with April's total of £2.5bn representing a massive drop of 65% from March and 7% year-on-year. In numerical terms, a total of 16,100 landlords took out a BTL mortgage during the month, down 64% on a monthly basis and 10% compared with April 2015.
Even so, this came as little surprise, with it simply reflecting the number of landlords withdrawing from the market following the implementation of the stamp duty surcharge. It could also signal the start of a return to normality, with lending in the months prior to the deadline arguably being a temporary and artificial level of activity.
The only sector of the market to avoid such a downturn was remortgaging. In fact, activity in this sector has gone in an entirely different direction, with it seeing the strongest performance in years!
The figures show that remortgage lending totalled £6bn in April, marking an increase of 25% from March and 40% compared with the year previously. It also represents the highest lending value for remortgaging since January 2009, while the number of remortgage deals advanced (34,800) has hit its highest level since July of the same year, also marking healthy growth of 23% month-on-month and 30% on an annual basis.
This is arguably the result of homeowners seeking to take advantage of the low mortgage rates available, and with our own figures showing the benefits of doing so, it's little wonder. The data shows that the gap between the current standard variable rate (SVR) and the average two-year fixed mortgage rate of two years ago has increased considerably this month, now standing at 1.34%, with the current SVR remaining unchanged at 4.81% and the two-year rate of June 2014 experiencing a dramatic drop to stand at 3.47%.
This means that those who are now approaching the end of a two-year deal could seriously benefit from remortgaging rather than reverting to their lender's SVR: they could experience a rate hike of 1.34% through reverting, or if they remortgaged to today's average two-year rate of 2.58%, they could enjoy a rate cut of 0.89%. Doesn't the latter make more sense?
It's therefore highly likely that activity in the remortgage sector will continue to rise, even if it takes longer for the house purchase sector to catch up. Either way, now could be a great time to consider your options: average rates may be sneaking up, but there are still some great deals out there, so make sure to do your research and see if you can take advantage.
Compare the top mortgages and the best remortgage deals using our best buy charts.
Landlords – check out the top buy-to-let mortgage deals to keep your costs as low as possible.
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