Historically, August has often been a month where the mortgage market takes a collective break. Obviously this is not a complete break because the wheels of business never stop turning but, with planned annual leave and school holidays dominating the month, it’s a time when, normally, activity levels inevitably slow down. However, 2020 is far from being a normal year.
Leading up to August, we saw activity and business levels rise across the buy-to-let sector in the early summer months, after what can only be described as a near shutdown. Figures recently published by UK Finance showed that gross BTL lending in June increased to £2.5bn, from £2.3bn in May. That meant total BTL lending in the second quarter was £7.4bn compared to £11.1bn in Q1.
One thing to note in June was that purchase numbers increased (albeit from a low base) while remortgaging fell back. Given that the chancellor announced the stamp duty ‘holiday’ only on 8 July, this provides a strong indication that many landlords are taking advantage of bargains arising from depressed house prices in some areas.
Remortgaging still dominant
Despite the growth in purchases, remortgaging continues to dominate the BTL marketplace, accounting for around 72 per cent of gross lending. Total market lending for June showed a £3bn increase – from £13.7bn in May to £16.7bn in June. Q2 market lending was said to have totalled £44bn compared to £64.2bn in Q1, and on a quarterly basis the BTL share of total lending was 17.3 per cent in Q1 and 16.8 per cent in Q2.
In terms of more recent activity and demand, according to research from broker forum Cherryplc.co.uk, more than half of mortgage brokers have seen an increase in BTL purchase business in recent weeks. The survey, carried out with Click2Check, found that 57 per cent of intermediaries had seen demand for BTL purchase deals increase, compared to just under 12 per cent who reported an increase in demand for capital raising on a remortgage.
The study found there had been a rise in the number of clients with more specialist requirements. Almost one in 10 (8 per cent) brokers saw a jump in demand for HMO purchase loans, while almost 4 per cent noted an increase in enquiries for lending on both multi-unit blocks of flats and holiday lets. There was also said to have been a rise in the popularity of short-term lending, with 8 per cent of advisers working with more clients on sourcing bridging loans for refurbishment tasks.
Positive factors
Recent market comments indicate that confidence is slowly but surely returning to BTL and the more specialist mortgage markets. When combined with the continued impact of the stamp duty holiday, these positive factors should help stimulate activity during Q3 and beyond. In addition, pent-up landlord demand remains evident, and extra competition throughout the BTL sector has resulted in some highly attractive products becoming available for either purchase or remortgage purposes.
From a Foundation perspective, it has been a busy time on the product and criteria front. We have recently made some significant rate enhancements to some of our best-selling products as we, alongside a whole host of other specialist lenders, look to further support the landlord community, particularly those who utilise limited companies in order to house their portfolio properties.
It remains an interesting time for many sectors across the mortgage market and the BTL sector continues to lead the way when it comes to both demand and the opportunities being created for the intermediary market.
