It may seem rather odd that the Government has acted so decisively in changing the landscape for landlords, considering they might appear to be natural bedfellows, however the tax relief changes and subsequent increase in stamp duty charges clearly define where their priorities lay. First-time buyers are actively being favoured in areas such as new housing supply, access to properties and curbing the ability, and appetite, of the buy-to-let landlord to compete with them.
How this might play out in practice is however still unknown. Will landlords seek to sell up? Will they attempt to cram their purchases into the first three months of the year? Will they keep on buying but increase rents in order to cover the increased charges and pull-back in tax relief?
These are all unknowns, plus of course the increased first-time buyer focus does not necessarily translate into more first-time buyers actually purchasing these properties. There is the rather large matter of finance in all of this, and as we’ve stated many times before, even with Government support, house price increases over the last few years effectively mean significant deposit requirements even at higher LTVs.
So, what of high LTV loans, their availability and accessibility? Well without question, over the last two years, Help to Buy 2 has acted as a considerable catalyst in this market. Our own, most recent figures (released in December) showed that the number of 95% LTV products rose by 84% in 12 months, up to 260 from 141 twelve months previously. The average rate on these products also fell to a record low of 4.12%. Good news all round one might think.
However, product numbers don’t necessarily equal greater lending levels. Indeed, there has been something of a decline – in Q3 last year £1.61bn was lent at the 90-95% LTV level, which was actually down 27% from the £2.2bn lent in the same quarter in 2014. It means that 95% LTV lending was only 2.59% of total mortgage lending, when it had previously been 3.9%.
So, what of the future? How will the Government’s renewed zeal for supporting first-timers translate into mortgage availability. Well, the good news is there has been something of a flurry of activity in the 95% LTV mortgage market, certainly since the start of the new year. New products have come to market and there have been price cuts for existing products, however this has to be combined with actual lending appetite.
And of course the rather large fly in the ointment is that Help to Buy 2 will finish at the end of the year. The scheme, which has done a considerable amount to help first-timers, will be gone in 12 months time and the big question is how will current Scheme members react – will they look to continue with a private insurance arrangement? Will they go it alone and offer similar products, without a guarantee? Will they revert to a pre-HTB2 state and we will therefore see further drops in lending levels? Again, all will be revealed in the future.
This therefore could be a pivotal year for the market because it’s clear that Government ambitions for first-time activity have to be matched by finance availability. If not then targets will remain unfulfilled and those potential ‘newbies’ who may have been feeling the love at the start of the year, will not feel so enamoured by the end.
