1-in-8 mortgages now a buy to let deal – reaching record high

Landlord Expert
By Landlord Expert November 9, 2012 10:43

Britain is issuing the largest number of 'landlord loans' since records began, official figures have revealed.

One in eight mortgages now a buy-to-let loan deal - an all-time high, the report said.

Of the 11.3million mortgages in this country, 1.44million are buy-to-let loans, rather than standard residential mortgages.

A decade ago, there were only 275,500 buy-to-let loans, equal to just 2.4 per cent of the entire market.

Today the number of buy-to-let loans is equal to 12.7 per cent, according to the figures from the Council of Mortgage Lenders.

The change is partly because a generation of young people have been locked out of the housing market by soaring house prices.

With an average house price of nearly £160,000, which is more than six times higher than the average salary, a generation of young people cannot afford to buy their own home.

To make matters worse, the average monthly rent has climbed to £741 per month, which inhibits their ability to save money every month towards a deposit.

Last month, a report from the Financial Services Authority, the City regulator, said the buy-to-let boom has added to the problem of people trying to buy.

News of the boom comes just a day after the Housing Minister slammed the country's housing market as 'dysfunctional', citing its impact on young people.

Mark Prisk, a Tory MP, said it 'cannot be right' that large numbers of people in their 20s and 30s cannot afford to buy their own home.

In his first speech to the country's mortgage lenders, he warned of a generation of young people who have no choice but to live at home unwillingly.

Mr Prisk, a former chartered surveyor, said the coalition Government has inherited 'a dysfunctional housing market whether it is freehold or leasehold.'

He said: 'We see 1.6million young people – people in their 20s and 30s – still living with Mum and Dad because they can't afford their own place.

'That cannot be right.'

It said: 'The increase in the prices of properties attractive to first-time buyers may have been fueled by buy-to-let investors who targeted the same type of properties.'

The FSA said the average age at which a young person manages to buy their first home is 31 and they earn an average salary of around £34,000.

By comparison, a typical buy-to-let investor is between the age of 45 and 64 and is a higher rate taxpayer, which means they earn more than £42,475.

Dan McLeod, a director of the estate agency Atkinson McLeod, said: 'The demand from investors for buy-to-let has never been stronger.'

With the base rate at an all-time low of 0.5 per cent, which means savers get pathetic rates close to zero, many decide to put their nest egg into property as an alternative to saving.

Yesterday the Bank of England's interest-rate setting committee voted to keep the base rate at 0.5 per cent for the 44th consecutive month, the longest period during which rates have not been changed since the aftermath of the Second World War.

One economist, Stephen Boyle, from the Royal Bank of Scotland, said: 'It currently feels as if the Bank is unlikely to change rates until most of us are well into our retirement.

' ark Harris, chief executive of mortgage broker SPF Private Clients, said: 'The rise in buy-to-let lending comes as no surprise, with low interest rates and rising demand for rental property from tenants making the private rental sector an attractive investment proposition.'

One economist yesterday raised his fears for the future, if the Bank's funding for lending scheme, aimed at boosting money available to businesses and homeowners, does not work.

With rates at rock-bottom levels and its money-printing programme, known as quantitative easing, hitting £375billion, it is not clear what more it can do to kick start the economy.

Chris Williamson, chief economist at Markit, the consultancy, said: 'The danger is that the Bank of England is looking increasingly helpless, working with ineffectual policy tools in an economy that looks set to worsen, which will do nothing to boost business and consumer confidence.'



Landlord Expert
By Landlord Expert November 9, 2012 10:43


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