SMP: experts predict equity release will help fill buy-to-let vacuum

04 April 2017

After doubling in volume from £20.1bn in 2013, to £40.6bn last year, the buy-to-let market is set to fall back by as much as 15 per cent in the wake of this month’s tax changes. However, experts who took part in the Society of Mortgage Professionals’ recent roadshows asserted that some of the estimated £5bn shortfall could be taken up by equity release lending.

According to Key Retirement’s business development director, Will Hale, the equity release market grew by 26 per cent last year and is forecast to make an even bigger leap in 2017 – possibly as high as 30 per cent, taking its total value to £2.8bn.

“The predictions were just some of many insightful forecasts and assessments of the mortgage market made at our six Q1 events, which concluded in Bristol at the end of March,” said Society of Mortgage Professionals head of operations, Vishal Pandya.

Marie Catch, buy-to-let proposition manager at Legal & General Mortgage Club continued: “Intermediaries continue see buy-to-let as a key part of the market but that it’s vital that they understand the significant changes that will affect it. Stamp duty, land tax, income tax, stress test rates and underwriting of portfolios are all changing and brokers need to be fully aware of the effect this will have.”

Meanwhile, Louisa Sedgwick, director of mortgage sales at Vida Homeloans, believes that what she describes as ‘dinner party landlords’ coming out of buy-to-let and putting properties back on the market could be good news for consumers, in that there may be more availability. “They currently hold a lot of potential first time buyer property,” she stated. “Releasing it could stimulate the market, which is what the government wants.”

‘The general consensus across the eight different sessions on each day was that the housing market has yet to settle,” added Pandya, who stated that we are currently in a 30-year low for house ownership, exacerbated by too many increasingly unaffordable properties in London and the south east.

“To counter this, the government has a total of 25 different schemes to encourage buyers, yet despite putting measures in place to control the buy-to-let explosion, the private rental sector continues to grow stronger. Right now, the balance is 64:36 per cent in favour of ownership, but that is expected to draw as close as 50/50 in the not too distant future.”

Against this backdrop, each of the events featured a final session from the FCA, in which the regulator outlined the basic tenets of the Mortgage Market Study.

Pandya went on: “They confirmed they will release an interim statement this Summer, with the full report due for publication in 2018. It will seek to establish what the drivers are behind consumers seeking advice and identify any barriers that need tackling. The FCA are also keen to find out if any aspects of the regulatory framework might be having a negative impact on competition.

“The overall message to advisers was clear: they were told, it’s your market,” he concluded, “and the FCA are encouraging advisers who are approached by them for comments/feedback to take part and give their views.”