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Pensioners set to sweep mortgage market

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Pensioners are expected to snap up large numbers of houses from April, with first-time buyers warned to act soon or face rising prices.

From April, new government rules mean those entering retirement will be able to take a lump sum from their pension.

This has led savings provider Scottish Friendly to warn that many older people will choose to invest in property, pushing up prices for first-time buyers.

Neil Lovatt, director at Scottish Friendly, said property was the most obvious investment vehicle for those drawing out of their pension pot.

“The baby-boomer generation has always had an unhealthy obsession with property,” he said. “This has been manageable, even beneficial to the economy when people slowly climbed the property ladder. But the new pension rules will essentially bankroll a generation, allowing them to buy into an already over-inflated market in the expectation that it will help fund their retirement.

“Estate agents up and down the country are rubbing their hands in gleeful anticipation of what is about to take place. Throughout the eighties and nineties the baby-boomer generation fuelled the housing market to such an extent that property ownership is quickly becoming the preserve of the old and the rich. Now they are getting a second bite of the cherry and could well tighten their grip on the property market so much, that generations of children to come will find it difficult to buy.”

Lovatt warned that mortgage lenders could refocus their offering towards those with big deposits, leaving first-time buyers out in the cold.

“With thousands of people gaining immediate access to cash lump sums we are likely to see improving rates in the 40-50% loan-to-value mortgage market,” he said. “These mortgages will be less risky for the banks, but it could result in first-time buyers having to build even bigger deposits to have even a slim chance of being accepted by lenders.”

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