by Mark Johnston
Should Building Societies Lend to Landlords?
The number of lenders offering buy to let loans has increased from 46 in 2010 to 69 in 2013, according to Moneyfacts.co.uk.
However, it seems that despite the number of lenders growing slowly over the past few years professional landlords still face limited buy to let mortgage options.
Building societies were originally established to house local communities, and the sector still advocate that they have a keen interest in supporting communities which offer a choice of different forms of housing.
Building societies began by providing homes for its members, but it now seems that they help landlords to snap up properties such as terraced houses which were traditionally bought by first time buyers.
Some experts believe that in the current climate, for some people renting is a choice rather than a necessity.
Tracie Pearce, head of pricing at Nationwide building society, suggests “we have seen the landlord market start to grow. As a modern mutual, we see our role as one of enabling people to have a ‘home of their own’. For some that might mean they rent”.
However, in reality only a very few people choose to rent over the long term, the rest are more accurately described as “trapped”.
Building societies are mutual organisations that are controlled by their members, therefore many people feel that they should really only help in home ownership and many people looking in to moving their accounts are keen to put their money in to building societies that only lend to owner occupiers rather than funding landlords investments.
Patrick Collinson, the Guardian Money editor, argues that “for every property bought by a buy to let investor, one disappears off the radar as far as first time buyers are concerned. Furthermore, the buy to let purchaser is sentencing someone else to renting”.
The Building Societies Association (BSA) has revealed that virtually all its members offer buy to let mortgages.
Therefore there is now growing concern that buy to let lending is estranging the people they originally sought to help.
Like any other organisation, building societies are interested in the bottom line, so it is not difficult to understand why these lenders are keen to offer buy to let loans to landlords. These particular loans will usually earn the society a higher fee than loans to say first time buyers and they are also regarded as lower risk.
A recent study of mortgage data has shown that banks and building societies are lending more money to landlords than to ordinary home owners.
Figures from the Council of Mortgage Lenders (CML) suggested that for every £1 of net lending to potential home owners, landlords are lent £1.11.
This therefore is the latest sign of Britain’s dysfunctional housing market in which buy to let purchasers are increasing their mortgage borrowing at a record rate.
This news all appears to add to the despair of many first time buyers, many of whom now fear they will never be able to own their own home.
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