First time buyers feeling the pinch

Mortgage debt denialFirst time buyers, who are already facing stiff competition from buy-to-let landlords wielding £100,000 deposits, will be in an even more difficult position from April, when the new pension lump sum rule comes into force. It is predicted that many pensioners will use their newly acquired funds to invest in property.

New figures from the MAB (Mortgage Advice Bureau), collated from leading UK price comparison sites, shows that in Q4 2014, potential house buyers looking for a specific buy-to-let mortgage indicated they had, on average, nearly £100,000 in equity to use as a deposit.

This data encompasses both re-mortgages and new loans. Figures from mortgage lenders show that, during 2014, the market was divided fairly equally between the two.

The total equity held by buy-to-let landlords was 15% greater when compared to the same period last year. It is likely that this is the result of rising property prices.

The figures from the Mortgage Advice Bureau are drawn from a total of 250,000 new mortgage searches per month. Around a quarter of the searches are for buy-to-let mortgage products. Here, landlords seek to borrow, on average, £129,964 to put towards a purchase price of £229,878. This equates to a loan to value of slightly over 56%. This means that such landlords are typically able to secure a mortgage rate as competitive as a very low 1.99%.

Despite this, there was some positive news for those planning to step onto the housing ladder for the first time. Nationwide’s most recent monthly house price index indicates that there was a 0.1% drop in February and a slight decrease in the annual growth rate.

However, new figures released by the Bank of England, show that mortgage approvals rose for the second month in a row in January this year. This has led a number of experts to speculate that house prices could start to rise again in the near future.

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