Tax changes and tougher mortgage lending rules have put the brakes on buy to let borrowing by property investors.
Banks and building societies report landlord borrowing has dropped by 19% in a year mainly due to a government onslaught to stop landlords buying homes to rent.
Mortgage lending in March was £21.4 billion, compared to more than £25 billion in March 2016.
Most lending is remortgaging or to first time buyers as landlords and movers struggle to buy homes, says the CML.
With 342,000 loans, the number of first time buyers in March was at the highest level for nine years.
Market in neutral
CML senior economist Mohammad Jamei said: “Mortgage lending appears to be in neutral gear. Our gross estimate for March is broadly in line with average monthly lending over the past year. Within this aggregate level, there has been a shift towards first-time buyer and remortgage customers, away from home movers and buy-to-let landlords.
“We expect this profile to continue over the short-term, as low mortgage rates encourage existing borrowers to remortgage and government schemes help first-time buyers. We do not expect any marked effect from the General Election.”
The slowdown in landlord purchases comes after almost three decades of spectacular growth.
In 1980, 2.45 million homes were privately rented – rising to 5.34 million by 2014, when the latest official figures were made available.
Landlord portfolio growth slows
“Our view is that there will be slower or limited growth in landlord portfolios, but, as with most policy and regulatory changes, we will need to wait until they are in place to get a better understanding of the cumulative impact on the sector,” said Jamei.
“It is possible some landlords will only become aware of the changes in late 2018/early 2019, when they come to submit their tax return for the current financial year.”
In the past year, the government has changed income tax rules for businesses renting out homes, while the Bank of England has made applying for a mortgage on a second home or home to rent more difficult by demanding borrowers prove they can afford to pay a loan if the home has no tenant.