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Buy-to-Let Mortgage Market Experiences a Sharp Decline

Jul 13, 2018 | Insurance

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Buy-to-Let Mortgage Market Experiences a Sharp Decline, Number of Homeowners Increase by 8%

As at May 2018, it was observed that the number of people going for new buy-to-let mortgages reduced sharply and this decline was attributed to the recently introduced government policies and tax changes. The same policy that led to this reduction concomitantly caused an increase in the number of first-time buyers.

In the month of May, a total of about 32,200 new mortgages were completed for new entrants to the market. This number is an 8.1% increase compared to the number of mortgages completed in May 2017. The average age of a first-time buyer is 30 and the gross household income is an estimated £42,000. The same demographic incur a loan of about £142,452 with a loan to value ratio of 0.85.

People who cannot manage to acquire properties normally are now climbing the property ladder as a result of schemes organized by the government. Some of these schemes include help-to-buy and shared ownership.

The director of mortgages at UK Finance, Jackie Bennet, had this to say; “The mortgage market currently is enjoying a pre-summer boost and this is driven by a rise in the number of first-time buyers and strong remortgaging activity.” He went on to say that, “Activity in the buy-to-let market is restrained at the moment and this is due to the recently instituted regulations and changes in tax policy.”

Image result for buy to let mortgage decline

Also, the changes to stamp duty caused a decline in activity in the buy-to-let market. Anyone who desires to purchase a second house, irrespective of the reason, is now required to pay a higher rate of stamp duty.

While the surge in the number of first-time buyers might signal a burgeoning market, research has shown that there’s still a myriad of people who are struggling to join the bandwagon. The fact is that people are not able to afford these properties and the telling factor is the number of people who need to apply for loans.

Apart from home buyers and buy-to-lets, we saw about 31,100 new home-mover mortgages in May; a 4.4% increase compared to last year. The average age of a home-mover is 39 with a gross household income of £55,000. The loan to value is reported by UK Finance to be 73.6%.

Jonathan Samuels, who serves as the chief executive of Octane Capital, averred that the occurrence in May perfectly evinces the change to the UK housing sphere in recent times.

According to him, “First-time buyers are currently dominating and amateur landlords are retreating. The activity in the buy-to-let market majorly entails remortgaging of existing portfolios so as to sustain a level of margin. However, the fact still remains that amateur landlords are quickly becoming misdating and the pros remain active.

Check out more about this article here: www.theguardian.com/business/2018/jul/12/first-time-buyers-on-the-rise-as-buy-to-let-mortgage-market-falls

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