Good news for first time buyers - terrible news for buy to let sector

Figures from the mortgage lenders’ umbrella group, UK Finance, suggest the government desire to see more first time buyers and fewer buy to let purchasers is paying off.

UK Finance says there were 35,500 new first-time buyer mortgages completed in August, some two per cent more than in the same month a year earlier. 

The £6.1 billion of new lending in the month was 5.2 per cent more year-on-year.  The average first-time buyer is 30 and has a gross household income of £42,000.

However, there were 38,000 new home mover mortgages completed in the month, some 2.3 per cent fewer than in the same month a year earlier. The average home mover is 39 and has a gross household income of £57,000.

And there were 37,100 remortgages completed in August, some 0.3 per cent fewer than in the same month a year earlier. 

But there was a dramatic slump in buy to let mortgage activity.

There were only 6,000 new buy to let home purchase mortgages completed in the month, some 13 per cent fewer than in August 2017. By value this was £0.8bn of lending in the month, 20 per cent down year on year.

Reaction from the industry has been mixed.

Jeremy Leaf, the north London estate agent and former RICS residential chairman, says: “There’s no sign of a major correction to the housing market as predicted by some, with first-time buyer numbers reaching a 14-month high. It remains to be seen whether the Budget [on October 29] actually encourages more potential first-time buyers to take the plunge before rising rents, prompted by shortage of property to let, makes deposit-saving even more difficult.”

Mark Weedon, head of research at investment platform Property Partner, says: “Our research suggests…37 per cent of landlords say they would increase rents on account of the buy to let crackdown. This will make it harder for those with dreams of home ownership to save for a deposit, as more spending will go towards their monthly rent. Ultimately, the Government must consider the impact of its policies.”

Mike Scott, chief property analyst at online agency Yopa, says: “There have been three years of sharp declines in buy to let purchases, which was the intention of the [government’s] tax changes, but it is likely that we are nearing the end of that process as the effect of those tax changes has now worked its way through the system.”