Paragon Mortgages’ latest Financial Advisor Confidence Tracking (FACT) report, reveals a modest increase in the volume of buy-to-let business being written by mortgage advisers in Q1 2016. Financial Advisors do however, have concerns about longer-term prospects for the market.
Financial advisors surveyed reported that 24% of their business in Q1 2016 consisted of buy-to-let, up from 23% in the previous quarter. Volumes of first-time and next-time buyers also increased. Reflecting these increases, remortgages declined from 35% of intermediary business in the previous quarter, to 32% currently.
Recent government policy has affected confidence in future business, however, with 13% of respondents expecting all types of mortgage business to decrease over the coming quarter, while 53% expect business to remain stable and just over a third (34%) expect an increase. On buy-to-let, opinion is evenly divided with 49% of intermediaries expecting demand for buy-to-let products to increase or stay the same, as compared to 50% who expect a decline in demand – with 1% unsure.
Despite this uncertainty the number of intermediaries stating that landlords will ‘keep current properties but not buy any more’ as a result of changes to income tax relief, has nearly halved from 32% in Q4 2015 to 18% currently, indicating that purchase intentions may be returning to the buy-to-let market. Likewise 23% of intermediaries stated that changes to tax relief would make ‘no difference’ to landlord plans, up from 19% in the previous quarter.
Remortgages continue to constitute the largest proportion of buy-to-let business in Q1 2016, accounting for 38% of business, up from 36%. Nevertheless, nearly a third of new buy-to-let finance in Q1 2016 (32%) was secured for portfolio expansion.
John Heron, Director of Paragon Mortgages, said...
Our latest FACT report reveals that advisers are circumspect about future volumes of BTL business as a result of recent policy developments. Over the short term around half of intermediaries expect to see a decline in buy-to-let business. That said, on the question of what impact income tax changes will have over the longer-term, sentiment appears to have improved materially over the last quarter with a sharp reduction in the proportion of landlords that are expected to sell property. Increased volumes of remortgaging in the buy-to-let market shows that there is healthy competition with landlords shopping around for a better deal. Whether the market remains as competitive once all the fiscal and regulatory changes are implemented remains to be seen.