Housing round up: Times still tough for first time buyers as buy to let surges


Housing & mortgage round upResearch released this week shows how hard life is for first time buyers to secure a mortgage, especially whilst rents continue to rise and mortgage lending criteria remains tight.

The buy to let market seems to be booming, although one leading figure believes this is not at the expense of first time buyers.

Finally mortgage lending has risen slightly, although the market is still clearly depressed.

Buy to let investors not forcing first time buyers out of the market

The claim that buy to let investors are forcing first time buyers out of the mortgage market was dismissed by at least one leading industry figure this week.

Matthew Wyles, group distribution director, for the Nationwide, the UK’s largest building society, said that it was stricter lending criteria and the requirement for a larger deposit which was causing difficulties for first time buyers and not buy to let investors snapping up cheaper properties to rent out.

Linda Wood, Mortgage Advisor, Nottingham

Linda Wood, Mortgage Advisor, Nottingham

If you need help with your mortgage why not contact Linda today on 0115 933 8433 or linda.wood@investmentsense.co.uk

Speaking earlier this week Wyles said: “Quite unfairly some commentators have blamed first-time buyers’ inability to buy on buy-to-let investors. I think that is just utter, unadulterated baloney for a number of reasons. Property prices are not rising and yet rental values are, so that clearly indicates that there is a demand for rental property that is outstripping the demand for owner occupation.”

He continued: “It is a complex algorithm but first-time buyers are reluctant to get into the market because of issues around criteria and the amount of equity people need to put down.”

Buy to lets are however one area of the mortgage market which seems to be booming.

Figures from the Council of Mortgage lenders show that in 2009 a total of £8.1 billion was lent to buy to let investors, in 2010 the figure rose to £9.7 billion, a figure already surpassed in 2011, with three months still remaining.

Average monthly rents continue to rise

The ‘mini boom’ in buy to let mortgages is being matched by the rise in average rents.

Figures released by LSL Property Services, who own a number of lettings agencies, show that the average monthly rent paid by tenants has risen for the ninth month in a row, although the speed of acceleration has slowed.

The average monthly rent is now £720 per month, a 0.2% rise on September which represents the smallest increase since February.

Property experts believe that the continuing rise in rental prices is due to frustrated first time buyers being unable to get on the housing ladder due to tight mortgage lending criteria and a shortage of suitable properties to buy.

David Newnes of LSL said: “The recent increases are likely to continue to level out in run up to Christmas – traditionally a slower time for the market.”

Newnes continued: “Nevertheless, despite the slower rate of increase, the cost of renting is still rising annually at nearly twice the speed of the average salary and many tenants will need to dedicate a growing portion of their disposable income to the cost of accommodation over the next year.”

Rise in mortgage lending but mortgage approvals fall

Council of Mortgage LendersGross mortgage lending totalled £13.1 billion in October according to figures released this week by the Council for Mortgage Lenders (CML).

The figure represents a rise of 13% on the same time last year when lending stood at £13.7 billion, however it is a fall of 4% on September.

Bob Pannell, chief economist at the Council of Mortgage LendersCML chief economist Bob Pannell says: “The underlying picture in the housing and mortgage markets has not changed dramatically over recent weeks.
“The immediate direction of house purchase activity is a little unclear, although the story for remortgages, with strong year-on-year increases in activity this year, is for the time being more straightforward.”

Further data showed that 48,200 mortgages for house purchases were taken out in September, a fall of 2% on the month before.

The CML also revealed that the average deposit put down by first time buyers is 20%, the same as the previous but lower than earlier in the year. The number of mortgages advanced to first time buyers has risen slightly, albeit from a low base due to subdued lending this time last year.

Mortgage trap

A new report from HSBC has highlighted that as many as 360,000 homeowners who bought their property at the height of the housing boom are now trapped and unable to move.

Falling house prices and tight mortgage lending criteria means that whilst these homeowners might not be in negative equity, where the property is worth less than the outstanding mortgage, they do not have sufficient equity to finance the larger deposits now required by many mortgage lenders.

The problem is particularly acute for first time buyers who entered the housing market for the first time in 2007, as traditional first time buyer properties have fallen further in value than other properties.

The research from HSBC showed that in 2007 the average deposit for a first time buyer was just 10%, figures released last week from the CML shows that this has now doubled to 20%.

Peter Dockar, the head of mortgages at HSBC: “These findings highlight the fact that first-time buyers can no longer rely on rising house prices to provide them with the deposit they need for their second purchase. They need to save or make overpayments on their existing mortgage if they want to move up the housing ladder.”

Mortgage advice

Whether you are looking for a mortgage advisor in Nottingham or further afield, whether you are a first time buyer, buy to let investor or would just like to move house or find an alternative mortgage then do not hesitate to contact our mortgage specialist, Linda Wood, on 0115 933 8433 or by emailing linda.wood@investmentsense.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £299 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.