Council of Mortgage Lenders revises forecast downwards to 1.17m transactions, as tax changes and Brexit uncertainty bite
Fewer people are expected to buy homes in 2017, as tax changes and economic uncertainty resulting from the Brexit decision deter owner-occupiers and landlords.
The Council of Mortgage Lenders (CML) said it expected the number of transactions to fall to 1.17m, the lowest level since 2013. The figure is below the 1.26m it forecast a year ago, which the CML said was “partly relating to the economic uncertainty from the EU referendum, but also because of tax and regulatory changes in the housing and mortgage market”.
In April, a higher rate of stamp duty on second homes was introduced, increasing the upfront cost of buying investment property.
Changes to the rules around landlords’ tax relief will start to be phased in from April 2017, and those buyers will also face tougher checks before they are given a mortgage.
The CML’s forecast for 2016 anticipated 1.25m transactions and £237bn worth of mortgage advances; with the end of the year in sight there look set to be slightly fewer sales, at 1.23m, but more lending, at £246bn.
The number of homes repossessed by lenders also seems set to come in lower than the forecast, at 7,900 rather than 18,000.
The CML said the housing market was “in a similar position to the economy, slightly subdued but holding up better than expected only a few months ago”.
Although data since the referendum showed the economy had performed better than was expected before June’s referendum, prospects were likely to remain more uncertain than usual for the next few years as a consequence of the Brexit vote, the CML said.
It said the UK would go through an adjustment period, and inflation and unemployment were both expected to rise.
Housing transactions were distorted by the stamp duty change in the spring, which caused many purchases to be brought forward, but the CML said the underlying trend had also softened and activity was subdued.
Paul Smee, director-general of the CML, said: “The housing market is relatively well insulated from direct Brexit effects as most activity is driven domestically, but it is not immune from more generalised economic uncertainty.
“And we expect any modest strengthening in homeowner lending to be offset by a less active house purchase market in buy-to-let, as both tax and regulatory changes bite on landlords.”
Simon Checkley, managing director of broker Private Finance, said: “Aside from the surge in buy to let we saw earlier in the year as landlords clambered to beat the Stamp Duty deadline, lending figures have showed little movement each month.
“I don’t expect we’ll see much in the way of change over the next 12 months compared with 2016. Indeed, we are likely to see inflation rise further in 2017, which will impact on consumers, so lending might be flat at best.”