The buy-to-let bounce mustn’t kill off the first-time buyer, warns Phil Whitehouse, head of The Mortgage Alliance (TMA)
The upcoming Royal Wedding has some similarities to the buy-to-let market. The buzz surrounding both is evident with many looking upon those closely involved or invited to the party with a certain degree of envy. The event itself will provide opportunists and those with sufficient foresight with a platform to generate some extra income. Some Londoners are renting out their property over the course of the event to passionate Royalists from all over the world and I’m sure the commemorative mugs, plates, flags and even pillowcases will be out in full force. Of course this is a short window of opportunity but a short-term money-making opportunity nonetheless and one not totally unlike how some people viewed the buy-to-let market in years gone by.
But whilst such an event will provide a much needed shot in the arm for the economic coffers there may also be some left feeling the repercussions. Imagine the poor retail workers in the capital who may not have benefitted from the official bank holiday and have to slog through the crowds and well-wishers. What about the self-employed or contractors on the breadline who could have done without the extra bank holiday and employers who have to deal with staff who have had the foresight to pretty much have three weeks off for the price of one when combines with the Easter holidays. Where there is Yina there always has to be some degree of Yang. This can also be reflected in the buy-to-let market.
The current increase in competition, profile and to some degree volume of buy-to-let business is on the one hand a positive for the intermediary market but also works to highlight the inadequacies of the residential market. Of course in this argument we have to incorporate lifestyle choice and whilst I’m sure there are a proportion of twenty, thirty or even forty something’s who are happy to forgo homeownership aspirations I still believe that the vast majority would choose to get on the property ladder if it was a viable option. But rather than focusing on the relative deficiencies of the residential market, let’s focus on the positives offered by the buy-to-let sector.
Lenders appear to be returning to this sector with greater appetites to lend which is great for the intermediary market. In recent times lenders such as Leeds BS has spoken of its plans to increase its mortgage lending and as such we have recently launched an exclusive two-year buy-to-let discount with the mutual. Skipton Building Society has re-entered the sector and the recent announcement that Mortgage Trust has also returned to lending with the launch of a range of remortgage buy-to-let products available only via intermediaries are also encouraging signs. Alongside these, still relatively new lenders such as Aldermore and
Precise Mortgages are continuing to build on the positive impact they have made on the intermediary market. This increase in activity has led to some much needed confidence returning with research from Paragon Mortgages revealing that nearly half of mortgage intermediaries reported an increase in buy-to-let business during the first quarter of the year.
Paragon’s Financial Adviser Confidence Tracking Index, a panel survey of approximately 200 intermediaries, found that 46% of respondents reported higher levels of buy-to-let business during the period compared with the fourth quarter of 2010.
Nearly one in five intermediaries reported an increase in buy-to-let business of more than 10% during the period, whilst 13% recorded increased business levels of between 6% and 10%. Meanwhile, 15% said buy-to-let business was up by 5%, whilst 45% said that buy-to-let business levels had remained unchanged during the first three months of the year.
Paragon’s FACT Index also showed that 53% of intermediaries reported improving credit conditions in the buy-to-let market during the first quarter, with wider product availability and easing criteria levels. Looking forward, 56% of intermediaries forecast that product availability will improve further during the second quarter of 2011.
With rents also reported to be up for the second consecutive month – according to the latest Buy-to-Let Index from LSL Property Services – and the private rental sector boosted by an influx of higher value property in Q1 of 2011 as suggested by the Association of Residential Letting Agents, the future looks rosy. Of course this remains an area in which intermediaries need to have a good understanding of the market and one in which their clients have to enter into wisely by ensuring that all their calculations add up in terms in both the long and short term.
As such 2011 will continue to see buy-to-let grow at a sensible level as lessons are learnt from the past. However, it’s also vital that the industry doesn’t forget those potential first-time buyers who remain at the core of a healthy and progressive mortgage market. Let’s hope they aren’t left behind and that the current buy-to-let momentum doesn’t price them out of the purchase market altogether.
