Figures have shown that the Mortgage Market Review, introduced in late April 2014, has caused a general slowdown in the residential mortgage market. Private Finance has said that capping mortgages at a certain income multiple combined with limiting the Help to Buy scheme is therefore not supporting home ownership and suggests that MMR might be having a negative impact on the most vulnerable section of the market.
In contrast, the broker has said that whilst the buy to let sector continues to succeed in providing a ready supply of generally well managed property, it remains non-regulated with lenders being ‘free from the constraints of MMR’ and able to advance up to 85% LTV interest only mortgages to BTL landlords.
Simon Checkley, Managing Director of Private Finance says:
"The outlook for house price growth remains heavily influenced by the BTL sector. Therefore, we are calling on regulators and policy makers to consider the effects of MMR on residential lending levels which, if maintained at their current level, could potentially exclude an entire generation of home buyers from the property market and force them into the private rental sector for years to come.
"Stifling activity in the housing market increases house prices by reducing supply; if existing homeowners had access to mortgage products which promoted affordability they might be inclined to bring their properties to the market thus increasing supply. These measures coupled with policies promoting development and house building could stimulate an otherwise lacklustre property market whilst simultaneously stirring up general economic activity."
Checkley added:
"Not allowing first time buyers access to mortgage products similar to those available to buy to let investors snapping up the same properties that first time buyers would choose to buy if they could afford them, also seems rather unfair. In theory, property prices and rent should rise in line with inflation and therefore owning a property with a mortgage which allows for interest only payments for an initial period is still preferable in many cases to being forced to rent property from the landlords fuelling the market."
Checkley continued:
"Our view is that the Government and the Regulator should work together to encourage lenders to accommodate all home movers with more innovative and flexible products. One example of this would be to offer the first 2 years of the mortgage on an interest only basis, progressing to graduated capital and interest payments after that time. This is exactly the kind of product that would offer the long term stability that residential borrowers require. However, our fear is that if the authorities do not collaborate further on this, we will simply continue to lock a generation of homebuyers out of the market and face the inevitable consequences in years to come. Similarly, it is also our firm belief that younger buyers should consider doing what generations before have done and make certain lifestyle compromises in order to gain exposure to the market early on to avoid being forever tenants."
