The wheels have fallen off Britain’s buy-to-let housing boom as new taxes and limits on lending stop would-be landlords entering the once-popular market.
Just 12.7pc of mortgages in the final three months of 2017 went to buy-to-let borrowers, Bank of England figures have shown, the lowest level since 2013.
It is down sharply from 14.4pc a year earlier and 16.3pc in the same period of 2015.
The drop comes after landlords were hit with a stamp duty surcharge, raising the cost of buying a house, and mortgage interest relief was scrapped, denting profits on rental properties.
On top of that, lenders were hit with extra restrictions on buy-to-let lending at the end of September, as the Bank of England’s Prudential Regulation Authority ordered banks to carry out tougher affordability checks on borrowers.
This also entails substantially more paperwork for borrowers.
“It is more likely to be would-be novice landlords having second thoughts about investing in property as we are seeing experienced investors remain committed to the sector, with a significant proportion incorporating,” said Mark Harris at mortgage broker SPF Private Clients, referring to the option of landlords setting up a company to avoid some extra costs.
“Lenders are increasingly offering products aimed at this group, so rates are competitive.”
The proportion of loans going to first-time buyers held steady at 21.1pc and home-purchase loans overall accounted for 64.5pc of all mortgages in the quarter.
Remortages took 29.7pc of the loans, up from 27.2pc a year earlier and 24.9pc in the same period of 2015.
Existing homeowners appeared to be keen to lock in low interest rates before November’s Bank of England rate hike has an effect on prices – and before any more hikes come in.
The proportion of new loans taken out at a fixed rate hit a record high of 90.6pc as borrowers sought to protect themselves against future rate increases.
That is up from 82.6pc a year earlier and compares with a low of 38.1pc in 2010.
At the same time some borrowers are stretching themselves further by borrowing a larger amount relative to their incomes to buy a home.
High loan-to-income (LTI) mortgages are showing signs of a return after a crackdown from the Bank of England in 2014 pushed lenders away from the riskier loans.
The proportion of borrowers taking loans of more than four times their income rose to 11.96pc, the highest level since those rules – limiting the proportion of loans at more than 4.5-times income – came into force.
Before the rules came in the four-times or more loans held 13pc of the market. The clampdown subsequently pushed those loans down to below 10.5pc of the market.
But they now appear to be returning as high prices mean borrowers have little choice but to take substantial mortgages to get a property.