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Landlord Mortgages Are Hard To Get say RLA

Landlord Mortgages Are Hard To Get say RLA

According to a recent survey by the Residential Landlords Association (RLA), almost half of their landlord members have encountered difficulty when trying to obtain a buy-to-let or landlord mortgage.

141 RLA members were asked how easy they had found it to access a buy-to-let mortgage,

  • 21% said they were unable to obtain a buy-to-let mortgage
  • 24% said they found it very difficult
  • 22% had to shop around
  • 14% found it easy to get a mortgage
  • 17% said they found it fairly straightforward

The RLA said that the first major challenge for the new housing minister Mark Prisk will be to persuade banks to unlock the financial support needed by private landlords to grow the residential lettings sector at a time when more homes are needed.

RLA chairman Alan Ward said: “We welcome the Government’s renewed commitment and interest in the opportunities that the private rented sector can play in meeting the country’s housing needs. However, this will not happen without financing from the banks. It is time that the blame game for the difficulties in accessing finance between Government and the banks came to the end for the sake of those desperate for a roof over their heads.”

The release of the RLA data coincides with news that the UK mortgage market has endured its third worst August for almost two decades.

The news comes from e.surv, which are part of the LSL property group, who have made the gloomy forecast based on its own activity and reckons to be correct to within a near margin of official statistics which will be issued later in the month.

The firm is predicting that house purchase loans in August fell 8% from August 2011, down from 53,040 approvals to 48,913 – making last month the third worst August for almost 20 years.

Whilst last month’s figure was up from July’s 47,312, e-surv said this shouldn’t be taken as a sign of improving market conditions, saying that July was weak by historic standards with purchase approvals 5% lower than July 2011.

The firm said tightening credit conditions and the effects of the double-dip recession were moving the UK mortgage market back towards 2010 levels and the annual contraction in landlord mortgages is the result of a sharp fall in lending to borrowers with deposits of less than 15%.

The average LTV on a property purchase loan has now fallen below 60% for the last three months, reversing a seven-month period where it was at least 60%.
 
Richard Sexton, business development director of e.surv, said: “Much of the progress the mortgage market has made since summer 2011 has been unravelled by the double-dip recession. Lending volumes – particularly to first-time buyers – are slipping back towards the dismal levels we last saw in 2010 and early 2011. This is largely thanks to a fall in the number of high loan-to-value mortgages banks are willing to grant.  Credit conditions for banks have become painfully tight, and they’ve responded by toughening criteria on mortgages aimed at borrowers with small deposits. The distraction of the Olympics, the awful weather and holiday season could also all be reasonably cited as potential contributory factors.”
 
e.surv said August was the third consecutive month where lending has fallen on an annual basis, and the biggest year-on-year fall for 15 months since 1993, when the Bank of England’s records begin, only 2008 and 2010 have seen lower lending levels during August.

e.surv’s analysis found that more landlords have stepped in to fill the vacuum left by first-time buyers at the bottom of the market. Despite overall purchase approvals falling 8% year-on-year, approvals on property worth less than £125,000 fell by only 4% as landlord mortgages were used to purchase property that was out of reach of first-time buyers.
 
Sexton said: “With rents pushed up to record levels, landlords are piling in to cheap property. Tight mortgage lending conditions are a virtuous circle for landlords and a vicious one for first-time buyers. The fewer first-time buyers there are, the cheaper property becomes for landlords, and the more expensive rents get. We expect landlords to continue to represent a disproportionate share of the buying market in the medium term. Would-be buyers will hope the Government’s Funding for Lending scheme can help improve the flow of credit in the near future.”
 
There was some positive news in August. On a month-on-month basis, house purchase loans rose 3% from 47,312 in July.

But this shouldn’t be taken as sign that market conditions are set to improve. July was weak by historic standards – purchase approvals were 5% lower than July 2011 – and high LTV lending levels were the same as in August.

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