Buy-to-let mar­ket cools and opens the door to first-time buy­ers

Mortgage Mat­ters

Yorkshire Post - Property - - PROPERTY NEWS -

Franz Muehlthaler, mortgage ad­viser, Hol­royd Miller Prop­er­ties

Key in­di­ca­tors of this in­clude: The price of the av­er­age prop­erty pur­chased by first-time buy­ers, which fell in Jan­uary by 2.7 per cent, sug­gest­ing that there is less com­pe­ti­tion for the same sort of prop­erty with buy-to-let in­vestors.

The av­er­age pur­chase price of in­vest­ment prop­er­ties pur­chased has fallen by 12.7 per cent yearon-year, po­ten­tially in­di­cat­ing that there is less de­mand in this par­tic­u­lar sec­tor and sug­gest­ing that in­vestors are turn­ing their at­ten­tion to cheaper priced prop­erty ar­eas.

Fig­ures re­leased in Fe­bru­ary from the Coun­cil of Mortgage Len­ders re­port an in­crease in first-time buyer ac­tiv­ity in 2016 of eight per cent year-on-year, and a de­crease in the vol­ume of buy-to-let lend­ing by 20 per cent year-on-year.

Dur­ing 2016 there was a mixed pic­ture in terms of adop­tion of the more strin­gent lend­ing cri­te­ria for in­vestors, with some len­ders adopt­ing the new prac­tices only weeks be­fore the new re­quire­ments were im­ple­mented, whereas oth­ers had in­tro­duced the changes some months ear­lier. As a con­se­quence, this al­lowed buy-to-let in­vestors an amount of “wrig­gle room” for sev­eral months. They were able to shop around and find slightly more flex­i­ble terms when ar­rang­ing their lend­ing. Len­ders now op­er­ate on a more strin­gent ba­sis when un­der­writ­ing buy-to-let bor­row­ers, which has a levelling out of the play­ing field be­tween buy­ers who are bor­row­ing to fund the pur­chase of their first home and in­vestors who are bor­row­ing to fund in­vest­ment.

The re­cent data avail­able from the CML shows us that first-time num­bers are now the high­est since 2007 which, given the cool­ing in buy-to-let ac­tiv­ity over the last few months as a re­sult of the Stamp Duty Land Tax changes in 2016, im­pend­ing tax changes and the new rules around lend­ing, per­haps isn’t a co­in­ci­dence.

What is also in­ter­est­ing to note is that the av­er­age first­time buyer loan to value has in­creased slightly, which could re­flect len­ders show­ing more flex­i­bil­ity and be­ing more ac­com­mo­dat­ing in terms of as­sess­ing af­ford­abil­ity. The at­ti­tude re­flects the cur­rent lev­els of con­tin­u­ing ul­tra-low in­ter­est rates.

Other con­tribut­ing fac­tors in the in­creased ac­tiv­ity could be at­trib­uted to some len­ders in­tro­duc­ing 95 per cent loan to value rates in Jan­uary. This ap­proach picks up the baton from the Help To Buy mortgage guar­ante scheme which ended in De­cem­ber. Of course, other ini­tia­tives ex­ist and in­clude:

Help to Buy ISA, where the gov­ern­ment will boost your sav­ings for a mortgage de­posit by 25 per cent. The max­i­mum gov­ern­ment bonus you can re­ceive is £3,000.

Shared Own­er­ship, where you buy be­tween a quar­ter and three­quar­ters of a prop­erty and have the op­tion to buy a big­ger share in the prop­erty at a later date.

The Help to Buy – eq­uity loan scheme, where the gov­ern­ment lends you up to 20 per cent of the cost of your newly-built home, so you’ll only need a five per cent cash de­posit and a 75 per cent mortgage to make up the rest. You won’t be charged loan fees on the 20 per cent loan for the first five years of own­ing your home.

Franz Muehlthaler, mortgage ad­viser with Hol­royd Miller Prop­er­ties in as­so­ci­a­tion with Reach 4 Mortgage So­lu­tions and the Mortgage Ad­vice Bureau.

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