Buy to let market to slump in 2016 and 2017, mortgage lenders predict

The Council of Mortgage Lenders is warning of a possible slump for the buy to let market in the next two years.

“Buy to let faces a challenging period as changes to tax treatment and the prospect of macro-prudential intervention run counter to otherwise strong fundamentals. Buy to let house purchase activity in 2015 may peak and fall away below 2014 levels by 2017” says the CML’s latest market commentary.

The CML says there are three substantial causes of buy to let uncertainty - incoming tax changes on mortgage interest relief from 2017, the recently-announced three per cent stamp duty surcharge on buying buy to let property from next April, and the possibility of the Bank of England constraining mortgages for landlords from next year.

“Inevitably, these will adversely impact the rate of growth in the sector and even cause lending volumes to ease back” warns the CML.

It says buy to let will account for nine per cent of all UK property transactions this year – still much lower than in the 2006 to 2008 period. BTL will account for around 16 per cent of all mortgaged transactions. 

“Future prospects are closely tied to potential macro-prudential regulation and incoming tax changes. We currently expect buy to let house purchase activity in 2016 to fall below its 2015 level, and for activity in 2017 to fall below the level seen in 2014” the council says.

With regard to the stamp duty surcharge, the CML says that a consequence will be higher activity levels in the first quarter of 2016, to avoid the hike before it comes into effect. “The scale in terms of transactions is likely to be in the low thousands, though the overall impact will be close to zero over 2016 as there will probably be a corresponding fall in transactions in subsequent quarters” the CML warns.