The latest buy-to-let figures from UK Finance show that whilst lending fell overall during 2020, the market showed welcome signs of recovery in the latter half of the year. Our Mortgages Managing Director, Richard Rowntree, reflects on the last 12 months.

If you had asked any lender in the buy-to-let space on 16 March last year whether they’d be happy with a 13% fall in overall lending in 2020, they’d have bitten your hand off. That was, of course, the date that Boris announced the first national lockdown on a cold Monday evening, essentially closing down everyday life, including the housing market.

The figures from UK Finance today show that buy-to-let lending fell to £37 billion last year from £42.5 billion in 2019, a remarkable figure considering the sector was shut for over two months and the length of time it took to get the wheels turning again.

The market was buoyed by two factors post lockdown #1 – record levels of tenant demand giving landlords confidence to invest and, of course, Rishi Sunak’s Stamp Duty holiday, shaving the buying costs for landlords. We all know the brake this put on the market after March 2016, when the 3% surcharge was introduced, and its release highlights the latent demand from landlords to add to their portfolios.

UK Finance’s figures show that buy-to-let house purchase became fashionable again in the second half of 2020. The number and value of loans written for house purchase in the final quarter of last year was the strongest since the first quarter of 2016, whilst December was the busiest month since March of that year.

Paragon certainly experienced this surge in business, with our pipeline hitting a record high during the first quarter of 2021. The good news is that the extension of the Stamp Duty holiday means that more of the applications in the pipeline will complete ahead of the deadline, so I’m expecting strong industry Q1 for this year numbers when they are eventually published.

What’s interesting is the impact of the Stamp Duty holiday on where landlords purchased property, with a resurgence in those more expensive regions where investors would achieve the greatest tax savings.

Industry stats show that the number of buy-to-let loans for purchase in London, for example, was 25% higher in the final quarter of last year than the same period in 2019, whilst the South East recorded an 18% increase.  The South West – another area with above average house prices – was 21% higher, although this could have also been boosted by landlords buying holiday lets for the expected surge in staycations.

Conversely, the North West, which has been the buy-to-let hotspot in recent years, was just 1.5% higher and other northern regions with below average house prices didn’t experience the same Rishi bounce.

However, the overall strength of the final quarter of last year helped claw back those lost few months and we sit here, nearly a year to the day of that first lockdown, looking ahead with confidence. We know we may not have yet felt the full economic pain of coronavirus, but the sector is in a much stronger shape than many would have predicted a year ago.