by Mark Johnston
It is the latest signs of Britain’s dysfunctional housing market in which buy to let purchases are increasing their mortgage borrowing at a record rate, while mainstream home owners are paying down debts and sitting tight.
Lending figures show a housing market which is under going a profound structural change.
On the one hand the private rented sector is growing and likely to continue to grow, supported by lenders. The ‘bullish’ landlord, buoyed by rising rents, property shortage and lengthening queues of desperate tenants, is keen to buy more properties immediately.
On the other hand is home ownership which is drifting further and further out of the reach of many. The anxious owner occupier, fearful about job security and house prices, is paying down debt and refusing to move up the ladder. This in turn is blocking many first time buyers.
Before the financial crisis, landlord lending and general lending grew in tandem. However according to recent figures from the Council of Mortgage Lenders (CML) and the Bank of England suggest that now for every £1 of net lending to home owners, landlords are lent £1.11.
In conjunction to these figures, two of Britain’s largest mortgage lenders, Lloyds banking group and the Nationwide building society have confirmed that their net lending to landlords currently exceeds net lending to home owners.
Tracie Pearce, head of pricing at Nationwide, said “the owner occupier market has been contracting and we have seen the buy to let market start to grow again”.
Data has shown that this situation has arisen only once before, which was only briefly back in 2010. However, the current trend in lending is expected to continue throughout 2012 and possibly in to 2013.
Banks and building societies can hardly be blamed for ‘courting’ landlords business, as after all lending to landlords is more profitable. Landlords put down bigger deposits, therefore making lending less risky in relation to house price falls.
Topping it all is the lenders view that if the mortgage repayments are dependent on rental income from tenants, who can be more or less replaced, the lender has greater security than where ordinary owner occupiers are concerned.
Although this data has sparked calls for lenders to again do more to help potential younger home owners and also for the government to increase the tax burden on landlords.
Research has shown that currently the average age of first time buyers, who are not helped financially by their parents, is nearing 40 years old which is up from 28 years old in 2005.
An average of 19,000 first time buyers got on to the housing ladder each month in 201, this is approximately about half of the pre-crisis level.
Matt Griffiths, of pricedout.org.uk, said “young people feel the dice are loaded against them on the housing front. Seeing landlords snapping up those few properties that are available is not helping”.
In conclusion it is difficult to see what could reverse this trend, apart from the possibility of government intervention through changes to taxation or tenancy law.
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