Buy-to-let given "unfair advantage" over residential buyers

Mortgage regulators have given buy-to-let investors an unfair advantage over residential buyers and the balance needs to be redressed, a broker has claimed.

Independent broker Private Finance said buy-to-let is booming while the Mortgage Market Review (MMR) has caused a slowdown in the residential mortgage market since April 2014.

Managing director Simon Checkley said MMR is having a negative impact on the most vulnerable section of the market. “Capping mortgages at a certain income multiple combined with limiting the Help to Buy scheme is failing to support home ownership.”

By comparison, the non-regulated buy-to-let sector is free from MMR constraints and able to advance up to 85% LTV interest-only mortgages to amateur landlords.

Checkley said: “The outlook for house price growth remains heavily influenced by the buy-to-let sector.

“Therefore, we are calling on regulators and policy makers to consider the effects of MMR on residential lending levels which could potentially exclude an entire generation of homebuyers from the property market and force them into the private rental sector for years to come.”

Checkley said that stifling activity in the housing market is increasing 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.”

Barring first-time buyers from mortgage products that are open to buy-to-let investors puts them at an unfair disadvantage when competing for the same properties.

Checkley said: “Owning a property with a mortgage that allows interest-only payments for an initial period may still be preferable to being forced to rent property from the landlords fuelling the market.”

He called on the Government and regulator to work together to encourage lenders to offer all home movers more innovative and flexible products.

“One example would be to offer the first two 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."