Mortgage market regulation has created a bias in lending which favours investors over residential homebuyers, independent broker Private Finance said, as it called for a review of the Mortgage Market Review effects.
The firm stated that capping mortgages at a certain income multiple - no more than 15 per cent of a lender’s books should be 4.5 times the mortgage - combined with limiting the Help to Buy scheme, is not supporting home ownership and the MMR might be having a negative impact on the most vulnerable section of the market.
By contrast, whilst the buy-to-let sector continues to provide 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 per cent loan-to-value, interest-only mortgages to landlords.
Simon Checkley, managing director of Private Finance, commented that therefore the outlook for house price growth remains heavily influenced by the buy-to-let sector.
“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.”
He argued that 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.”
At a more basic level, Mr Checkley said that not allowing first-time buyers access to mortgage products similar to those available to buy-to-let investors 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.”
The most recent Bank of England and Financial Conduct Authority statistics showed in June that the value of residential loans advanced to first-time buyers decreased over the quarter to £8.9bn from £11.2bn in the previous quarter.
However, there was an increase in value terms for buy-to-let lending over the last year - from £6.8bn in the first quarter of 2014 to £7.6bn in the first quarter of 2015.
Private Finance urged government and the regulator to work together in encouraging 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,” said Mr Checkley.
“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.”
peter.walker@ft.com
