UK mortgages buy-to-let mortgages
Mortgage lending to buy-to-let investors is on the rise ahead of a 3% increase in stamp duty in April 2016Dan Kitwood/Getty Images

Buy-to-let mortgage lending is accelerating rapidly as investors rush to buy properties ahead of a stamp duty hike in April 2016. The Council of Mortgage Lenders (CML) reports a 35% annual leap in gross buy-to-let lending in November 2015, when 23,300 mortgages were issued.

Chancellor George Osborne will introduce a 3% levy for purchases of additional properties, on top of the standard stamp duty rates, in the new tax year. He also scrapped a tax relief allowing buy-to-let investors to offset their mortgage interest payments against their income tax bills.

A survey of landlords by the Residential Lettings Association (RLA) found 46% trying to complete new property purchases before the higher stamp duty rate in April. RLA also found that 10% now plan to exit the market – potentially 200,000 landlords – and 33% will consider no longer investing.

The CML said the value of gross buy-to-let lending leaped 46% year-on-year in November to £3.5bn. Of this, £1.3bn was for house purchases, a 30% increase, and £2.1bn was for remortgages, up 61.5% as the prospect of an interest rate hike by the Bank of England draws nearer.

Since the mid-1990s when the first buy-to-let mortgages were introduced to the market, the sector has boomed. A shortage of housing and intense demand has forced up house prices and rents, making it a more attractive market to investors because of the vast potential returns. Osborne's tax hikes may put the brakes on buy-to-let.

"First-time buyers, homemovers and those seeking to remortgage have had it much easier thanks to a rock-bottom base rate, but nowhere was this upswing in lending more evident than in the buy-to-let sector," said Peter Rollings, chief executive of the Marsh & Parsons estate agent. "However, this hasn't gone unnoticed by the government and in the short-term the April intervention on stamp duty will ensure that buy-to-let lending continues to be the one to watch over the next few months."

The CML also said total mortgage lending for house purchases was up 18% over the year in November to £10.7bn, though it was down 9% on October. First-time buyer lending was up 14% year-on-year to £4.2bn, but down 9% on the previous month.

"As expected, mortgage lending activity eased back as the normal dip in the winter months began," said Paul Smee, director general of the CML. "There was still growth across all lending types in November compared to the year earlier suggesting continued improvement. Our forecasts anticipate that gross lending will continue a slow but steady upward trajectory over the next two years."