by Mark Johnston
In an astonishing admission, Nationwide’s group distribution director Matthew Wyles said that ‘as a lender, we would rather lend 75% loan-to-value on a buy-to-let mortgage to an experienced buy-to-let investor, than to a first-time buyer at 95% LTV.’ This surprising candor was expelled in a recent housing industry debate set up by HSBC Bank plc.
While the innate risk associated with First Time Buyers is quite obvious when compared to experienced buy to let borrowers, this wasn’t the reason for Matthews surprisingly forthcoming view. The Council of Mortgage Lenders has pointed out that the amount of regularity capital that an organization has to hold for a 90 per cent loan compared to say a 60 per cent mortgage is between six and eight times greater. This means that the lender will make less profit from the larger LTV deals on the back of new regulations. For Nationwide to come out and express this view in public is astonishing considering all the work that they have done in recent times to attract customers back through their doors.
The Council of Mortgage Lenders (CML) has reported that during January close to 40 per cent of buyers bought their home with cash and didn’t require a mortgage at all. There seems to be a rise in the portion of home buyers who have begun to buy their homes in cold hard cash.
Since records first began to record this statistic in 2005, there appears to be a more than doubling in the number of buyers who are using cash instead of turning to lenders for large and expensive mortgages.
Chief executive of Chesterton Humberts estate agency, Robert Bartlett, has commented that the level of cash dealing in the market is at a historic high. Robert went on to say “In certain regions, the proportion of cash buyers will be even higher than these figures suggest,” he says.
“For example, in south-west England, I would say it is probably more like 50 to 55%.
“In some areas of London, it can be up to 80%,”
This recent increase in cash buying has been attributed to “the Saga generation” according to housing expert Henry Pryor, who went on to say “They are downsizing and pocketing a profit from previous housing booms, divorcees benefiting from financial settlements and foreigners or expats returning to the UK,”
The trend is increasing because cash rich buyers see the housing market as an investment that is practical too. They can literally live inside their investment. Mr Pryor says that “Putting the money in a bank account may be safe, but you will get a woeful return on it, while stocks and shares look like the two ugly sisters – leaving property as the Cinderella of the investment world,”
One the other side of the coin is the increasing number of people who simply cannot scrape together enough money to put down a deposit. This has increased the demand in rental properties and obviously the banks and building societies will target any growing trends and market movements.
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