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The Council of Mortgage Lenders (CML) has just published its monthly Regulated Mortgage Survey data for August 2015. Whilst the survey shows a slight dip in lending on the previous month, we are still confident that lending overall will continue to remain at levels not seen since 2008, well into the New Year. The swap rate outlook for the next ten years is around 2 per cent, which is a clear sign that markets do not expect a sharp interest hike in the foreseeable future. For borrowers, this means that low rates are here to be enjoyed for some time to come. In addition, mainstream lenders such as NatWest have returned to the interest only market which is set to encourage further competition and product innovation among this group of lenders. This move back towards interest only lending is one that should be welcomed, rather than feared, as these products can cater to a sizeable chunk of the market and can be hugely beneficial for the right borrower; assuming they are suitably underwritten in the first instance.
It is interesting to see that despite a strong second quarter, buy to let lending has slightly fallen in August which may be a result of lenders tweaking their affordability criteria and ‘stress test’ rates as well as seasonality factors. The Woolwich for example recently introduced an affordability test that looks at the landlord’s total outgoings including their residential mortgage. NatWest recently increased the stress test of BTL loans from 5.25% to 5.5% and will now also look at the overall indebtedness of landlords. Factors such as this will have contributed to the reduction in lending. In addition, we might be seeing the start of a fall in buy to let activity in advance of the implementation of tax changes in 2016. We are also watching closely for any effects from the chancellor’s move to increase the powers of the Bank of England’s Financial Policy Committee, enabling it to impose loan to value limits and debt-to-income ceilings on mortgages in the buy-to-let sector.