First-time buyer market continues to grow while the buy-to-let sector stagnates

Michael Lloyd

April 17, 2019

The first-time buyer market continued to year-on-year for the fifth consecutive month, while new buy-to-let home purchase mortgages dropped once again, UK Finance Mortgage Trends Update for February has found.

There were 24,880 new first-time buyer mortgages completed in February 2019, up 4.1% year-on-year while the were 4,800 new buy-to-let home purchase mortgages completed in February 2019, down 7.7% year-on-year.

David Copland, director of mortgage services at TMA, said: “Whilst activity from first-time buyers continues its upward trajectory, the buy-to-let market could do with further attention.

“As previous tax and regulatory changes continue to loom over the private rental sector, advisers will prove essential in guiding these customers towards the best solutions to fit their individual needs.

“At TMA our core focus is supporting these advisers, providing them with the quality lending solutions needed to maintain consumer confidence in the market.”

While buy-to-let house purchases continue to contract due to tax and regulatory changes, buy-to-let remortgaging has increased as borrowers move from fixed rate mortgages and lock into new attractive rates.

There were 14,400 remortgages in the buy-to-let sector, 2.1% more than in the same period last year.

Tomer Aboody, director of property lender MT Finance, added: ‘It is no surprise that buy-to-let numbers are extremely low with just under 5,000 new purchases in the month, considering the tax and regulatory changes which have hit the sector.

“Landlords are taking advantage of cheaper rates on buy-to-let loans and remortgaging while looking at the commercial space to make further investments where regulations are softer.

“With news of further tenant protections being introduced with regard to evictions, landlords are uneasy and increasingly uncomfortable with traditional buy-to-let.

“The retreat of landlords from the market is producing more opportunities for first-time buyers, as the government intended.

“First-time buyers are borrowing more to get on the ladder but because credit is so cheap this isn’t necessarily a reckless move. With property prices softening and mortgage rates remaining low, it is a good time to buy.

“Remortgaging continues to be popular with people taking out a bit of money, although not overstretching themselves, staying put and using that for home improvements or for a rainy day.”

Some 23,660 homemover mortgages were completed in the month, 0.1% more year-on-year. Homemovers are at the same levels they were at this time last year.

There were 18,200 new remortgages with additional borrowing in February 2019, 10% more than in the same month in 2018. For these remortgages, the average amount taken out in February was £52,000. Additionally, there were 18,360 pound-for-pound remortgages, with no additional borrowing, 7.8% more than in the same period last year.

The average loan-to-value ratio in the remortgaging market was 57%, while the average loan-to-income ratio was 2.74.

This is considerably lower than mortgages for house purchases, which showed an average loan-to-value ratio of 72% and a loan-to-income ratio of 3.37. Customer engagement in the remortgaging market remains high, with borrowers able to access a wide range of competitive products.

Andrew Montlake, director of mortgage broker, Coreco, said: “With delay after delay, and indicative vote after indicative vote, a growing number of people are saying to hell with Brexit and are getting on with their lives.

“There’s a significant amount of pent-up demand out there and it’s now really starting to come through. This is especially the case with first time buyers, who sense the current uncertainty is a massive window of opportunity to get on the ladder.

“Not only are house prices more attractive than they have been for a number of years, but first time buyers are being accommodated by Help to Buy, competitive mortgage rates and reduced competition from amateur landlords following recent tax changes.

“Remortgages are the other area of strength in the lending sector, which is no surprise given some of the competitive products and rates available as lenders compete for market share.

“Over the past month or two, we’ve seen a marked pick-up in mortgage enquiries as people give up on Brexit and make their move.”

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