Sunday, May 22, 2022

First-time property UK buyers buoyant despite Covid crisis

property UK buyers

These borrowers are choosing a BTL investment as their first purchase instead of buying a home to get a foot on the property ladder

First-time buyers have been disproportionately hit by the Covid crisis, but first-time buyer landlords are a niche part of the market that has remained resilient amid the pandemic, according to brokers.

Instead of buying a home to get a foot on the property UK ladder, these borrowers are choosing a buy-to-let investment as their first purchase.

Along with the wider buy-to-let market, this segment has seen an increase in activity since the summer, stimulated by the stamp duty holiday, according to Ying Tan, founder and chief executive at broker Dynamo.

He said: Given buy to let is still more attractive than alternative investments this is no surprise.

There are a number of reasons why owning a buy to let may be more suitable than owning a home.

Often it is buyers who are living in London or the South East where it’s tougher for salaries to meet higher purchase costs.

Instead these borrowers can buy a property in other parts of the country where prices are lower, and yields are favourable such as northern cities like Leeds, Manchester or York.

Stuart Phillips, director of Aalto Mortgages Ltd, has long had a steady stream of first-time buyer landlord cases. He said: The typical client is usually a professional living at home in the South East, who has been gifted money by family, but doesn’t want all the other overheads that come with owning a home, but also don’t really want to just sit on the money in the meantime.

Affordability is based on the rent potential – or interest cover ratio (ICR) – however lenders also assess buyer affordability – and they are not usually able to borrow more than they would qualify for on a residential purchase.

There are also good deals currently available in buy to let, according to Jane Simpson, managing director at TBMC. She said: Rates are really attractive on buy to let – now is a good time to grab the deals.

This is in contrast to higher rates of higher loan to values (LTV) within the residential market.

Simpson added that with savings rates so low, someone who isn’t ready to buy a home may still want to put money into property. People want to invest money in something tangible. Property has longevity, people think if they invest in bricks and mortar, they have got something to show for it.


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