Lenders Preferring Buy to Let Landlords Over First Time Buyers
While lending is remaining tight for most buyers in the housing market, it appears that landlords are starting to get a break. Many lenders are deciding to become a part of the larger demand for rental properties and lure landlords to their deals. Landlords are being favored for loans more than first time buyers said one leading mortgage lender.
In an industry debate hosted by HSBC, Nationwide’s group distribution director, Matthew Wyles, stated: "As a lender, we would rather lend 75% LTV (loan-to-value) on a buy to let mortgage to an experienced buy to let investor, than to a first time buyer at 95% LTV." The reason behind the curve toward landlords is due to the high demand for rental property. Households that would normally be shopping for their first time homes are instead opting for rental property out of necessity or as an option instead of taking on major debt. Landlords are not having any problem finding renters and rent levels are rising as demand increases. This is why many lenders are coming out with new mortgage and remortgage deals for the buy to let landlords. Many see the trend of preferring landlords to first time buyers by lenders as problematic for the housing market overall. In preferring to fund those that rent rather than those that would like to buy it slows the property ladder and pushes many into a cycle of renting for the rest of their lives. The property ladder needs first time buyers to purchase the starter homes of families looking to upgrade without them the property ladder stalls. With lenders preferring landlords to first time buyers, the outlook for first time buyers coming back into the housing market slims. Matt Griffiths from the campaign group PricedOut says: "For anyone concerned about maintaining widespread home ownership, this is deeply worrying. Many young people are now being effectively disenfranchised from the property-owning democracy by buy-to-let investors. Buy-to-let benefits from both cheaper mortgage finance (via the use of interest-only mortgages) and tax breaks on interest payments, which means they can easily outgun any first-time buyer for the purchase of lower-end properties."