The number of Buy-To-Let loans released last March jumped 21 per cent according to new data from the Council of Mortgage Lenders (CML). On the other hand, home loans granted to first-time buyers dropped by five per cent during the same period.
Astonishingly, the total value of the approved loans amounted to £2.7 billion- a figure which is 35 per cent more than the value of loans released in the same period last year and 13 per cent more than the loans approved last February.
The robust growth experienced with Buy-To-Let mortgages, unfortunately, is not felt in the entire industry, especially with first time buyer mortgages. Data from CML showed that holders of first home buyer loans are now only slightly higher than the number of investors holding Buy-To-Let mortgages at 23,000 and the value of total approved loans are at £3.4 billion.
The disparity in the 2 area’s growth is even more evident when you compare the number of approvals made during the first quarter of 2015. Approvals for Buy-To-Let mortgages were at 52,300 – a 15 per cent increase from Q1 of 2014. In contrast, 61,300 First-time buyer mortgages were approved, which is an 11 per cent fall from last year’s figures.
Many analysts attribute the growth of buy-to-let loans with low-interest rates and liberal changes on laws regulating how retirees can spend their pension.
Steve Bolton, founder and chairman of Platinum Property Partners, however reminds retirees to take caution before they invest their pension on Buy-To-Let properties.
He reminds them that even though acquiring property is an important ingredient for a pension portfolio, they shouldn’t put all their eggs in one basket. Bolton argues that retirees should diversify their investments, since they would be needing money for different purposes and levels of urgency.
Now that the approvals for But-To-Let mortgages are heating up, does this mean first time buyers are slowly being locked out of the market? The answer is a big, fat N-O.
This data only solidifies a post-GFC fact that mortgages have become harder to get if you are a first-time buyer. But that doesn’t mean it’s impossible to finance a house.
I don’t remember which financial advisor said this, but it was pretty good advice I hold on to: before reaching out to a bank, reach out to close friends and family first. That’s because the people close to you care about you, rather than care about profiting from you (through interest). While that advice was meant for smaller items, the same spirit can be applied for homes. In my case, I helped my daughter raise the deposit she needed to qualify for a home loan. The money I raised to help her isn’t a loan, so my daughter doesn’t have to worry about that down the road. Moreover, the added funds I helped her with allowed her to pay more than 10 per cent of the deposit. And the higher the deposit, the more favourable the interest rate will be (at least for most cases).
So to every first time buyer who’s shaking on their knees because of this news- keep calm. Remember that when a door closes, another one opens. You just need to keep your options open.Tags: Buy-To-Let loans, Buy-To-Let mortgages, first home buyer loans, first time buyer, first time buyer mortgages