Buy to Let Boom Pushing Out First Time Buyers.

by Mark Johnston

For those not already on the property ladder a financial storm is hitting their ability to get a mortgage, whilst the rental inflation hits their ability to save.

The ‘perfect storm’ which is sweeping the property market at present is putting homes out of reach of first time buyers an in to the hands of buy to let investors.

Matt Griffith of first time buyer campaign site, says “in a market where equity is king, investors are able to outbid first time buyers for available lower level properties”.

Director at mortgage broker Private finance Melanie Bien agrees with Matt Griffith by saying “canny landlords are cashing in a perfect storm of rising rents, falling mortgage rates and stagnant property prices”.

Many banks have been offering tempting deals, which in turn has seen landlords cashing in and snapping up properties which would be ideal starter homes for first time buyers.

According to recent research from data provider moneyfacts, there are now approximately 486 different mortgages for landlords to choose from whilst there are just 270 available for first time buyers with a 10% deposit.

The bank of England has stated that the demand for buy to let mortgages has significantly increased over the past few months. Most major lenders reported demand for but to let lending increased more over the summer, reflecting rent rises.

Figures from the council of mortgage lenders (CML) show that 7,200 fewer mortgages were approved for first time buyers in 2011 than in 2010; however the figures also show that mortgages for landlords grew by 5,600.

Both tenants and first time buyers alike face a bleak future: squeezed out of the market by house prices remaining high and on top of this soaring rents being charged by landlords.

Rents rose in all regions of the UK in September 2011, thus pushing the average rent to record highs of £718 and £1,029 in London per month.

While rising rents are great for landlords, it does make life even harder for first time buyers to save enough for a deposit. A typical deposit required is around 20% of a property’s value which is around £25,000. Even if a first time buyer could save a massive £300 per month it would take them 7 years to raise this deposit.

First time buyers who have little deposits and small incomes just can not compete against landlords, especially as they usually have large sums of money to put down as deposits for properties. Greg Clark communities and local government minister suggested that “the private rental sector is ‘destroying family life’”.

Many experts believe that the buy to let boom has made an even greater problem in the already struggling property market, rather than a solution it so desperately needs.

Richard Sexton, business development director of e.surv stated that “with the economy in peril from every angle, lenders are playing it safe. But for those who can access mortgage finance, life is particularly sweet”.

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