Banks and building societies are lending more money to landlords than to ordinary homeowners
Lloyds Banking Group, and the country’s largest building society, Nationwide, have confirmed that their net lending to landlords currently exceeds net lending to homeowners.
It is the latest sign of Britain’s dysfunctional housing market in which buy-to-let purchasers are increasing their mortgage borrowing at a record rate while mainstream homeowners are paying down debts and sitting tight. It will add to the despair of younger people, many of whom now fear they will never be able to buy.
An analysis of ‘net’ lending figures – measuring the difference between what comes in and what goes out in the entire mortgage system – shows that by the end of 2011 net landlord lending had overtaken homeowner lending.This situation has arisen only once before, briefly in 2010. The trend is expected to continue through 2012. Before the financial crisis, landlord lending and general lending grew in tandem.
Figures from the Council of Mortgage Lenders and the Bank of England now suggest that for every £1 of net lending to homeowners, landlords are lent £1.11.
Britain’s biggest mortgage lender, Lloyds Banking Group, and the country’s largest building society, Nationwide, have confirmed that their net lending to landlords currently exceeds net lending to homeowners.
Strong demand from landlords wanting more properties in their portfolios, these lenders say, contrasts with cautious private buyers who lack the confidence or means to purchase. All lending remains woefully low.
In January, the latest month for which figures are available, net lending from all 47 building societies, including Nationwide, was just £1million. This equates to just seven average mortgages.
The data has sparked calls for banks to do more to help younger homeowners and for the Government to increase the tax burden on landlords.
The average age of first-time buyers not helped financially by their parents is nearing 40, up from 28 in 2005. Four out of five buyers aged under 30 are assisted by their parents.
Matt Griffith of priceout.org.uk a lobby group representing young professionals who cannot buy, fears the resurgent buy-to-let sector will fuel a vicious cycle in which both rents and house prices will remain high, making buying a home harder still and causing the pool of tenants to grow.
He fears a widening social divide between wealthy couples who can afford to help their grown-up children on to the housing ladder and everyone else.
Home ownership grew consistently from 1980 to 2003, when 71 per cent of all households were owner-occupied. This has since slipped back to 66 per cent, with the private rented sector filling the gap. Many young people pay more to rent than they would for a mortgage, but lack the means to build up a deposit.
Griffith said: ‘Young people feel the dice are loaded against them on housing, and are increasingly depressed. Seeing landlords snapping up those few properties that are available is not helping.’
Tracie Pearce, head of pricing at Nationwide, said: ‘The owner-occupier market has been contracting and we’ve seen the landlord market start to grow again. As a modern mutual, we see our role as one of enabling people to have a ‘‘home of their own’’. For some, that might mean they rent.’
An average of 19,000 first-time buyers got on the housing ladder each month in 2011 – about half the pre-crisis level.