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Chase for rates leads landlords to remortgage
15 July 2015
The great buy to let mortgage boom may not be all it seems, according to latest official data from lenders.
Although £2.5 billion was advanced to property investors in May, more than half the cash – £1.4 billion – was for remortgaging rather than buying new homes.
Figures from buy to let bank and building society trade body the Council of Mortgage Lenders (CML) reveals that borrowing for buying residential investment property was up 8% from April and 10% year on year.
The data for remortgages showed cash lent to landlords was up 27% compared with May 2014 and unchanged from April 2015.
Altogether, lenders agreed 17,500 mortgages – with 8,400 funding new buy to let purchases and 8,900 going to refinancing existing borrowing.
The CML commented that the figures reveal a trend in landlords refinancing since the start of this year and may reflect a chase for lower fixed rates in the expectation of mortgage rate rises over the coming months.
Paul Smee, director general of the CML, said: “House purchase lending in May was slightly up on the previous month, suggesting the market might be waking up after a subdued first quarter.
“Activity has broadly been down on last year but we expect it to rise in the summer months as, with historically low interest rates and a competitive lending environment, borrowing conditions are relatively favourable. But we cannot ignore the continuing affordability constraints caused by high house prices relative to earnings which will work in a contrary direction.”
Meanwhile, the CML is changing the rules relating to buildings insurance cover on purchase or remortgaging of a buy to let home.
Lawyers arranging a property conveyance must make sure that borrowers have buildings insurance in place at completion of the mortgage and should inform property owners that they must retain the cover throughout the term of the mortgage.