Recent figures show that the demand for buy-to-let loans has declined whilst the demand for first time buyer mortgages in the UK has significantly increased.
Studies by UK Finance show that there were over 32,000 first time buyer mortgages taken out in May 2018, an 8.1% increase from last year. Studies also reported a 4.4% increase in new home mover mortgages and a 7.1% increase in new home owner remortgages.
Comparatively, there were only 5,500 new buy-to-let mortgages completed in May 2018, an astonishing 9.8% fewer than in 2017. The popularity of the buy-to-let market has substantially lessened and culpability is being placed on the governments regulatory tax changes.
Director of mortgages at UK Finance, Jackie Bennett, comments “the mortgage market saw a pre-summer boost, driven by a rise in the number of first time buyers and strong remortgaging activity”. She continued by stating “purchases in the buy-to-let market continue to be constrained by recent regulatory tax changes, the full impact of which have yet to be fully felt”.
Jonathon Samuels further adds, “what activity there is within buy-to-let is primarily the remortgaging of existing portfolios or properties” supported by statistics that show 36,000 new home owner remortgages in May.
Research shows that first time buyers moving into their second property have to borrow on average £25,000 in order to progress onto the next step on the property ladder. Second steppers such as these are currently paying over £7,000 on stamp duty tax when purchasing a new property. Stamp duty also demands that anyone purchasing a second property must pay a higher rate of interest compared to those purchasing a primary property, perhaps a reason for the decreasing popularity of buy-to-let mortgages.
John Phillips, operations director at Just Mortgages states “stamp duty is the biggest barrier to a freer housing market”. He continues by saying “if it was cut altogether, or at least cut significantly, it would have a hugely positive impact, not just on the housing market, but the economy as a whole”.
Despite a brief struggle with affordability on the market, mortgage lenders are relaxing their criteria while the property market is offering competitive rates. Both first time buyers and landlords should take time when deciding what property is best for them whilst weighing up the benefits and disadvantages of each.
The Help to Buy scheme, administered by the Government in 2013, gives opportunity to both first time buyers and home movers by requiring them to pay only 5% of the value of the property as a deposit. Alongside shared ownership mortgages, a scheme that divides a mortgage based on the proportion of the shared property you own, the government have been able to execute projects that give more opportunity to prospective buyers.
Both government policies and tax changes have completely reinvented the housing market and what it means to be a buyer.
Author Bio
Hopwood House are property investment specialists, with a large portfolio of investment opportunities in the residential buy-to-let and student property investment markets.
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Daniel Peacock