First-time buyers on the rise as buy-to-let mortgage market falls

The number of first-time buyers rose in May while the number taking on new buy-to-let mortgages fell, in a sign that government policies and tax changes are rebalancing the housing market.

There were 32,200 new mortgages completed for first-time buyers over the month, 8.1% more than in May last year. The £5.4bn of new lending was up 12.5%, according to figures from UK Finance, a lobby group for the financial services industry.

The average first-time buyer in the UK is 30, has a gross household income of £42,000 and takes on a loan of £142,452 at a loan to value of 85%. Government schemes such as help-to-buy and shared ownership have helped some people get on the property ladder who would have otherwise been unable to afford to.

However, the number of new buy-to-let mortgages fell by 9.8% in May compared with a year earlier to 5,500. Lending was £700m, 22% lower than in the same month last year.

The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity, Jackie Bennett, the director of mortgages at UK Finance, said.

Meanwhile, purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.

The figures suggest changes to stamp duty introduced by the government in April 2016 are cooling on the buy-to-let market. Anyone buying a second home for any reason now has to pay a higher rate of stamp duty than someone buying a property that will be their main home.

Despite the rise in first-time buyers in May, Bennett said some potential buyers were still struggling to get on to the property ladder.

Affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples,  she said.

The number of people moving home also increased in May, with 31,100 new home-mover mortgages completed, up 4.4% compared with a year earlier. The average home mover is 39, has a gross household income of £55,000 and a loan to value of 73.6%, according to UK Finance.

Jonathan Samuels, the chief executive of the property lender Octane Capital, said May’s lending data was a “perfect snapshot” of the changes to the UK housing market in recent years.

First-time buyers are in the ascendancy while amateur landlords are beating a fast retreat. What activity there is within buy-to-let is primarily the remortgaging of existing portfolios or properties in order to maintain some kind of margin.

While professional landlords and institutional investors remain active, amateur landlords are fast becoming an anachronism.”