Buy to let borrowing has dropped by more than a third in a year, according to the latest official figures.
Instead of expanding property portfolios, landlords are remortgaging and lenders are expecting the number of applications for loans to drop to levels last seen in 2015.
Trade body The Council of Mortgage Lenders (CML) blames the lack of interest in buying more homes to rent on tax changes raising stamp duty on buy investment properties and the phasing out of mortgage relief for higher rate taxpayers from April 2017.
Stricter mortgage affordability rules applied by the Bank of England are also making loans harder to come by for landlords.
“Buy-to-let lending, driven by remortgage activity, saw its strongest monthly lending level since the stamp duty changes on second properties introduced last April. Despite this, we expect buy-to-let lending levels in both 2016 and 2017 to prove lower than their 2015 recent peak as further tax changes take effect,” said a CML spokesman.
Although gross buy to let lending of £3.5 billion was the highest since stamp duty rules changed in April 2016, two-thirds of loans were remortgages.
The CML recorded 6,700 loans to purchase buy to let homes in November, compared with 10,000 a year earlier – a fall of 33%.
The value of the loans was also down 31%, from £1.3 billion in November 2015 to £900 million in November 2016.
Meanwhile, the figures for remortgages was up – 6.9% in numbers from 13,100 in November 2015 to 14,000 a year later and 4.8% in value from £2.1 billion in November 2015 to £2.2 billion in November 2016.