The amount of buy-to-let mortgages offered to investors increased by one third over the first quarter (Q1) of 2012, say the Council of Mortgage Lenders (CML).
The CML revealed that 32,300 buy-to-let loans were provided in the first three months of the year, a 32% rise on Q1 of the previous year.1
However, the amount of mortgages offered to first time buyers in April decreased to the lowest number for nine months, according to E.surv, chartered surveyors.
The firm said that the number of mortgages leant to first time buyers in April was just 11,307, a 5% drop from March, and the lowest since last July.1
Mortgage providers are becoming reluctant to offer loans to first time buyers, because of the high loan-to-value rate that they need. Banks are more inclined to lend to buy-to-let landlords, as they generally have bigger deposits.
Business Development Director at E.surv, Richard Sexton, says that mortgage lenders have “begun to scale back” their offers to first time buyers.
He says: “Buy-to-let landlords are taking the places of first time buyers, as there is an absence of them in the market place because they can’t get loans.”
Sexton also notes that the housing sector would be in a “far worse place” than it is if buy-to-let landlords did not return to the market.1
Chief Executive of Dragonfly Property Finance, Jonathan Samuels, says that there has been a “seriously sharp spike” in applications for mortgages on buy-to-let homes in the first four months of 2012. He also predicts that this will continue “for some time yet.”
Samuels comments: “A shortage of rental stock and strong demand from the growing number of forced tenants will keep driving the sector forward. There’s a lot of portfolio building, as investors add properties to give them increased exposure.”
He believes that investors find the buy-to-let market a “pretty stable place to be”, as house prices drop, and mortgage lenders still find owner-occupiers risky.
“Investors feel that there’s a lot left in the buy-to-let market, and are putting their money where their mouth is,” says Samuels.
However, he also advises potential investors to “know what they’re doing”, and be prepared for rising interest rates.1
Buy-to-let lending is still just a third of its 2007 levels, despite sharp increases in the past year, says the CML.
Matt Hutchinson, Director of SpareRoom.co.uk, says: “Will buy-to-let lending ever return to 2007 levels? With average loan-to-values on buy-to-let mortgages at 75%, and average minimal rental cover at 125%, it is unlikely, as 25% deposits will prevent a large number of people, particularly amateur landlords, from buying rental property.”1
Tracy Kellett, Managing Director at BDI Home Finders, a company of buying agents, says that despite the buy-to-let sector being strong, it remains a “shadow of its pre-housing crash levels.”1
Housing minister Grant Shapps explains: “We do not have to make a choice between first time buyers and buy-to-let. We need both. And while a third of all mortgages went to first time buyers last year, only 12% went to buy-to-let landlords.
“But I’m determined to pull out all the stops for those who want to get on the property ladder, which is why in March, the Prime Minister and I launched the NewBuy Guarantee scheme, which is expected to enable up to 100,000 aspiring homeowners to buy newly built properties with just a fraction of the deposit they would normally need.”1