The Bank of England’s Monetary Policy Committee has once again voted in favour of keeping its Base Rate of interest at 0.5%, following the MPC’s monthly meeting to discuss.
Whilst there was a nod to a potential increase in Base Rate late last year, as two members of the MPC repeatedly voted in favour of a 0.25% increase, in later months all nine members voted unanimously in favour to hold.
This comes after a spike in mortgage lending for February and March, ahead of the 3% surcharge in Stamp Duty Land Tax imposed on investment and secondary property purchases with effect from 1st April.
The Council of Mortgage Lenders has revealed a staggering rolling increase in Buy to Let lending during February, with 23,700 mortgages being drawn down, up 61% on the previous February.
Figures from the Bank of England show an anticipated drop in Buy to Let funding for the second quarter of this year, as the 3% surcharge makes it less attractive to invest in property.
The Bank’s quarterly Credit Conditions Survey indicates that demand for mortgage funding steadily increased throughout the first quarter of 2016 and that demand is expected to increase further still throughout Q2. The vast majority of this activity is made up of residential funding, with buy to let funding expected to “fall significantly”.
This indicates a healthy property market, as described by Andy McBride, Business Development Director at Contractor Mortgages Made Easy.
“All signs point toward the Buy to Let market cooling off over the coming months, as landlords take time to factor in the cost of increases in both Stamp Duty and tax treatment of rental income.”
“The next few months will be a good time for the First Time Buyer sector, particularly now that the period of intense competition with those aiming to beat the Stamp Duty deadline for investment property is over.”
Prices for First Time Buyers are still at record high levels, with the average price of a first time home in the UK now standing at £176,281, nearly 10% higher than at this point last year.
“A big driver for this is the ability for Contractors to access more mortgage rates than ever before, with new lenders opening their lending criteria to us regularly” adds McBride. “Contractors now have a wider lending potential than at any point previously, meaning that many who thought they would never be able to buy are now settled in their own homes.”
The remortgage market, however, is where lending is expected to remain strong throughout 2016, as McBride explains.
“A key lending area for banks has been the purchase market, as for a long time demand for housing has risen and continues to do so. We would anticipate, however, that the remortgage market is an area that will see significant strength throughout this year, as increasing numbers of people opt to use their first home as collateral to secure a second home for investment purposes. Despite the additional Stamp Duty, there are still significant profits to be made.”
Article By: Bradley George, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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