The latest figures for buy to let mortgage approvals have revealed that numbers rocketed in January as buyers rushed to beat the upcoming stamp duty changes.
In research from esurv, January saw 85,400 house purchase approvals – a rise of 20.6% on December’s figure.
However, this is the highest number recorded since October 2007 when 87,594 approvals were registered.
Over the past year, house purchase lending has risen in the UK by nearly 40%.
Rush to obtain buy to let loans
A director of the chartered surveyors esurv, Richard Sexton, said: “Buy to let mortgage approvals have contributed to January’s home lending growth with a rush to obtain buy to let loans before duty changes begin in April.
“Many predicted that the buy to let sector would narrow but we’ve seen lending appearing to do the opposite.
“The rise in buy to let has not been at the expense of first-time buyers since the number of small deposit loans granted in January has risen and it’s a sign that lenders are giving first-timers a chance.”
He added that the surge in buy to let buying has helped to conceal the strength of small deposit lending and the picture for first-time buyers is ‘upbeat’.
This view is contrary to the popular belief that buy to let landlords are pricing first-time buyers out of the UK’s property market.
In addition, the Government has also introduced a number of initiatives to help first-time buyers get onto the property ladder including the recently introduced Help to Buy ISA.
Buy to let landlords ignorant of mortgage changes
Meanwhile, more than half of those applying for a buy to let mortgage or unaware that the mortgage tax relief rules are changing.
Of the landlords least likely to appreciate the change are accidental landlords, which are those landlords who have not intentionally become the landlord of a rented property, according to Direct Line for Business.
Of those applying for a buy to let mortgage, 62% of applicants confessed to being unaware of the mortgage tax relief changes and of the Mortgage Credit Directive which affects an applicant’s ability to land a mortgage approval.
Under the directive’s rules, landlords who have one or two properties for rent may find it impossible to pass the more stringent affordability tests for mortgage approval. For accidental landlords, this figure rises to 71%.
Buy to let mortgage applications have rocketed by 29%
The survey also reveals that buy to let mortgage applications have rocketed by 29% over the past 12 months and now account for 70% of all new mortgage applications.
From April next year, landlords in the UK will not be able to deduct their mortgage interest payments before calculating their tax and from April this year, landlords also face a stamp duty hike which will see them pay an extra 3% for a buy to let property.
