Buy-to-let lending set to fall after stamp duty hike

Demand for buy-to-let borrowing is expected to fall "significantly" in the coming months, according to a Bank of England survey.

The Bank's Credit Conditions Survey of banks and building societies found that demand for mortgages from home-buyers increased in the first quarter of 2016 and demand for buy-to-let also increased.

The report said demand overall was expected to increase slightly in the next three months, "although demand for buy-to-let lending was expected to fall significantly".

Estate agents recently reported a bottleneck of buy-to-let investors rushing to beat a three percentage point stamp duty hike for this sector, which came into force on April 1.

Housing market experts believe the impact of the hike means some purchases were brought forward which might otherwise have taken place later in the year.

The Bank's findings were released as the Council of Mortgage Lenders (CML) said landlords collectively borrowed £3.7 billion in February - a figure which is up by 61% compared with a year earlier.

The CML said the bulk of the loans handed out in the sector were for re-mortgaging rather than house purchase.

CML director-general Paul Smee said: "Activity has been boosted by landlords seeking to complete purchases before tax changes in April. We do not expect activity to show such strong year-on-year growth later in the year."

Meanwhile, in a further sign of what is to come, property website Rightmove reported that interest in new purchases from buy-to-let investors decreased by 27% in March compared with the same month last year.

The Credit Conditions Survey also found that mortgage availability to people with smaller deposits of less than 25% increased slightly in the first quarter of 2016.

The overall availability of credit to the corporate sector was unchanged in the first quarter for firms of all sizes.

But for small businesses, the proportion of loan applications being approved increased, continuing a trend seen over the last year.