Buy-to-let purge fuels increase in first-time buyers

FIRST-TIME buyer numbers have hit a 12-year high, as they take advantage of dwindling competition from amateur landlords who have been driven out by the tax crackdown on buy-to-let.

Brexit has made many older homeowners nervous about moving but the younger generation is holding its nerve and seeing this as their opportunity to get on the housing ladder.

There were 370,000 new firsttime buyer mortgages completed in 2018, the highest number since 2006 and an increase of 1.9 per cent on 2017.

However last year saw a sharp drop in new buy-to-let mortgages, according to the latest UK Finance Mortgage Lending Trends Statistics.

Homeowners are mostly staying put until uncertainty over Brexit blows over, but first-time buyers are taking up the slack.

First love

Keith Haggart, managing director of lifetime mortgage provider Responsible Lending, said political turmoil and Brexit turbulence have failed to deter first-time buyers. “An army of utterly determined purchasers of starter homes is powering the market while former owner-occupiers coast along,” he said.

They are taking advantage of rock bottom rates and the Government-backed Help to Buy: Equity Loan scheme, which allows them to buy a new-build property with a deposit of just 5 per cent. Haggart added young buyers are mobilising in large numbers, with 31,900 buying in December alone: “Despite the hazy Brexit outlook, most still see property as the bedrock that can secure their financial future.”

He added homeowners further up the chain are cautious: “The market has first-time buyers to thank for keeping it moving.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said the trend is even more remarkable given the difficulties of building a large enough deposit given today’s high prices: “Many can only buy with the support of their families as the ‘bank of mum and dad’ is being called upon more than ever.”

landlord low

The number of new buy-to-let mortgages fell 11.5 per cent last year to 66,400, with lending down 15 per cent to £9billion.

Harris said experienced landlords remain committed, but novice investors fear the trickier tax and regulatory environment.

North London estate agent Jeremy Leaf said young buyers are taking advantage of reduced competition from buy-to-let and this bodes well: “First-time buyers are the market’s lifeblood as they tend to move up the ladder, releasing chains, but landlords usually buy at lower levels and stay there.”

Legal & General Mortgage Club director Kevin Roberts said the mortgage market continues to demonstrate resilience: “The number of products is at the highest levels we’ve seen and along with competitive rates, is continuing to entice borrowers.”

no Fear

Paul Smith, chief executive of Haart Estate Agents, said the buoyant housing market has defied Brexit fears and this has continued into 2019: “Our agents saw buyers return to the market in droves in January.”

House price growth has slowed but Smith said he expected to see a rise in the months ahead.

However, he warned first-time buyers should not celebrate too soon as there has been a 20 per cent rise in the number of people renting between ages 25 and 34, according to new figures from the Office for National Statistics.

He said a generation is growing up worse off than their parents: “Rents gobble up incomes, and home ownership is continuing to be out of reach for the majority.”

staying put

Separate research from Yorkshire Building Society shows the number of existing homeowners moving has fallen by almost half since the financial crisis.

Strategic economist Nitesh Patel blamed a shortage of housing stock: “The figures for firsttime buyer mortgages are almost double 2008’s level and just 9 per cent lower than the 2006 peak.”