Mortgage market biased against homeowners
Mortgage broker Private Finance said current regulations benefit buy-to-let investors instead of over residential homebuyers.
The firm said since the introduction of the Mortgage Market Review (MMR) in April 2014, the residential market has slowed as banks prefer to lend to elsewhere.
Simon Checkley, managing director of Private Finance, said that growth of the buy-to-let market was forcing up house prices for residential buyers.
“The outlook for house price growth remains heavily influenced by the buy-to-let sector,” he said.
“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.”
Checkley said that the lack of regulation in the buy-to-let sector was encouraging banks to shun first-time buyers and home movers.
“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,” he said.
“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.”
He added: “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 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.”