Lloyds cuts loans for landlords amid buy-to-let bubble fears ahead of Whitehall crackdown
02-29-2016
By Alex Hawkes For The Mail On Sunday
Britain's biggest mortgage lender has reined in its buy-to-let lending ahead of a Whitehall crackdown that could burst the buy-to-let bubble.
Lloyds Banking Group said last week that it was giving up market share in the £200billion buy-to-let lending market.
The bank’s lending to landlords stands at £55.5billion, up 4 per cent from £53.3billion last year, it said.
Buy-to-let: Lloyds' lending to landlords stands at £55.5billion, up 4 per cent from last year
Chief executive Antonio Horta Osorio told investors: ‘We believe that in a low growth environment, where most growth is coming from buy-to-let, which is growing at 12 per cent, the prudent and appropriate combination is to protect margins.’
Buy-to-let buyers will face a 3 per cent stamp duty surcharge from April, while Chancellor George Osborne has also slashed tax relief for landlords, including restricting the amount of mortgage interest they can set against rental earnings.
A general view of Lloyds Bank in Camberwell, London as the bank is to pay fines worth £218 million to UK and US regulators in relation to the manipulation of Libor. PRESS ASSOCIATION Photo. Picture date: Monday July 28, 2014. See PA story CITY Lloyds. Photo credit should read: Anthony Devlin/PA Wire
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Figures suggest that despite the crackdown there has been a surge in loan approvals driven by buy-to-let.
Horta Osorio said that the recent growth in buy-to-let lending reflected a long-term shift towards renting.
The Bank of England has expressed its unease about the growth in buy-to-let lending, which represents 15 per cent of all lending, up from just 2 per cent in 2000.
'Protect margins': Lloyds chief executive Antonio Horta Osorio
The Bank is to be handed new powers to restrict lending, having said that it is worried the buy-to-let market could be hit harder by a rise in interest rates than that for owner-occupied loans, and that forced selling by landlords could exacerbate house price falls leading to big losses for banks.
Other banks continue to expand their buy-to-let lending.
Royal Bank of Scotland said last week that its lending to Britain’s landlords now sits at £18.5billion, up from £15.2billion a year ago – a rise of more than 20 per cent.
RBS is trying to expand its mortgage lending operations, where it has a small market share relative to its size in other parts of the banking market.