Buy-to-let investors are back in favour with mortgage lenders for the first time in two years, raising renewed concerns that first-time buyers could once more be squeezed out of the market for one and two-bedroom properties by landlords.
Brokers said that a number of lenders have started to focus on attracting landlords with more favourable interest rates, after a long period of freezing them out.
Despite the credit-fuelled boom and subsequent collapse of the buy-to-let market, which left many city centre flats empty and landlords unable to complete purchases, the lenders that are now re-entering the market perceive their customers as less risky than first-time buyers.
Whiteaway Laidlaw, a subsidiary of Manchester Building Society, which entered the buy-to-let market for the first time six months ago, and whose typical borrower is a GP with two or three buy-to-let properties, said that it was targeting high-earning landlords rather than first-time buyers because they were less likely to default.
It has also introduced a mimimum age limit of 30 to reduce exposure to younger, inexperienced buy-to-let investors.
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David Cowie, chief executive of Manchester Building Society, said: “First-time buyers do not have a proven track record of meeting mortgage repayments. They might have a good credit history from paying off credit cards but a mortgage debt might be ten times what they are used to. We think that grade A buy-to-let is a much lower lending risk.”
Mark Clare, chief executive of Barratt, one of the UK’s biggest housebuilders, said: “There is definitely more buy-to-let availability now than there was. Lenders are telling us that rather than increasing loan availability to first-time buyers, they are preferring to lend to buy-to-let investors.”
Ray Boulger, director at John Charcol, the mortgage broker, said: “There has been a steady trend of lenders offering better deals to buy-to-let landlords over the last three months that has recently accelerated.
“The market is benefiting from an increase in competition, with an increased range of products and/or lower rates announced over the last week from BM Solutions, Godiva, Whiteaway Laidlaw, Aldermore and The Mortgage Works.”
Although buy-to-let investors have not outnumbered first-time buyers as a proportion of the mortgage market since mid-2008, their numbers are beginning to rise again. They make up just over 6 per cent of the mortgage market, according to the Financial Services Authority, down from about 12 per cent in the second quarter of 2008. Meanwhile, the proportion of first-time buyers has risen from 9 to 14 per cent over the same period, despite the rise in the size of deposit required, boosted by funds from parents and grandparents.