24 September 2014
Buy to let investors with large cash deposits are replacing first time buyers, as risk-averse lenders are drawn back to the buy to let sector and away from the high loan to values required by most first time buyers.
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The new report from property investment expert Assetz say those buying with mortgages have deposits of 25-40% typically, and are an attractive prospect to lenders due to the lower loan to value loans required and their proven track record in repaying mortgages.
Typical first time buyers, in contrast, are being excluded from the market by stricter deposit requirements, lack of bank capital, and because they present a less attractive prospect to lenders due to the higher loan to value loans required and their lack of track record in repaying a mortgage loan.
Stuart Law, Chief Executive of Assetz, said:
"Lenders are making no secret of the fact that they would rather allocate the limited funds they do have to the lower risk option of buy to let loans, with deposits of 25-40%, than first time buyers loans with 90% loan to values. As a result, the buy to let sector is recovering at a remarkable rate, as investors are drawn back by the need for a long-term, low-risk investment for their cash.
"The buy to let sector has not been as hard hit by the recession as people feared, due to the fact that interest rates have remained extremely low. This has protected landlords by giving them cashflow, and future rate rises, which are likely to be small and gradual, will be covered largely by rental increases. As many as 40% of all investment purchases through Assetz currently are cash, requiring no mortgage lending at all."
Assetz stands by its original prediction of +5% growth in house prices in 2011, and believes the market will return to peak pricing by the first half of 2012, being currently just 8% away from peak pricing in March 2011. Prices were up just under 1% in the first quarter of 2011 according to the Assetz House Price Watch, a composite index of all the main indices.