MortgagesNov 15 2017

Pension freedoms haven't led to buy-to-let boom

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Pension freedoms haven't led to buy-to-let boom

Pension freedoms have not led to swathes of consumers cashing in their pension to use as a buy-to-let deposit in their later life, according to those operating in the market.

Speaking in London today (15 November), at a Financial Adviser mortgage masterclass on guiding clients through buy-to-let taxation, a panel of specialist lenders and mortgage brokers said there had not been the predicted wall of money coming out of pension pots post April 2015 and into properties.

What has been happening, according to the panel, is that people aged 55 and over are either making cash purchases, or are using their pensions to help their children onto the property ladder. 

Charles McDowell, commercial director of mortgages for Aldermore, said: "We have seen a couple of cases of people using their pension to get into buy-to-let but there is nothing that would indicate any trend."

The point was raised by Wlady Koch of Life Planning Associates, who asked: "Is there any evidence that, with pension freedoms, people are accessing their pots, as some of these pots are very large?

He questioned whether this was becoming a concern, particularly as the result of high transfer values from defined benefit pension schemes.

Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, said: "We have looked at this specifically, as there is a concern that people might be using their pension pots and maybe buy-to-let isn't the right course of action for all consumers. 

I believe regulators are trying to stifle the market and make it difficult for everybody. Jane King

"From what we can see, they are not doing this from a mortgage perspective, however, as they are not using their pension pots as a deposit. We think what some people might be doing is using the pot as a total cash payment.

"Is it the right thing for them? I suppose, like every decision, it comes down to what is right for the client."

Rob Sinclair, chief executive of the Association of Mortgage Intermediaries, said he had also seen a rise in cash-only purchases at the point of pensionhood, rather than a new swathe of first-time landlords.

He explained: "People are beginning to play in this space, and usually this is a cash purchase and [the pensioner] is looking for the income yield off this."

For Mr Sinclair, this is why there is a problem with regulators trying to control the rental market by focusing only on buy-to-let, as regulators generally can't touch this sort of cash-only investment unless it is in a self-invested personal pension.