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Renting Hot, Mortgages Not
With lenders restricting interest-only options, dropping loan to values and a rising appetite to do buy-to-let lending Yuan Phoon investigates whether homeownership may be tipping once more
The landscape of the property market is undergoing a quiet transformation. A nation of aspiring home-owners is being locked out of the property market and as a result the balance between renting and buying is being shaken at its foundations.
An Englishman’s home is his castle but it seems the future of home ownership and the freedom of a person to do whatever they want in their house, is now under threat with the resurgence of rental accommodation. If the private rental sector takes over as the preferred choice of accommodation and renters do not require home financing, brokers will need to ask themselves a serious question: if people are not buying what am I selling?
A TIDE IN THE AFFAIRS OF BROKERS A broker’s bread and butter business is residential mortgages. That is the offering which gets the consumer through the door but as every adviser knows the consumer’s foremost concern is to get the house they’ve fallen in love with, not jaw-dropping rates.
28 MORTGAGE INTRODUCER APRIL 2012 There is anecdotal evidence that
prospective owners who were previously seduced by the romance of home ownership are now falling out of love with owning homes and are being funnelled towards the rental market. Brokers have been reaping the benefits of this change of heart recently as they pursue buy-to-let deals. “The buy-to-let market seems to be taking over from the mainstream for quite a few brokers,” says Mike Fitzgerald, sales director at Essex- based EMBA Group. “They’re quite simple to place. There is a lot of business there and lots of people are starting rent.” Statistics from the Council of Mortgage Lenders also corroborate sentiments that buy-to-let business is booming. The latest research from CML shows that the last quarter of 2011 hit a three year high in the number of buy-to-let gross advances at 34,800. Industry consensus explains this shift is because first-time buyers are being squeezed out of the market due to expensive house prices and the lack of affordable 95% loan to value deals.
Their only alternative is therefore to become reluctant renters. Another sentiment is however entering the market. It’s not a question of can’t buy but won’t buy. “The perception of renting is changing,” says John Heron, director of Paragon Mortgages. “It is no longer seen as a last resort choice in housing. Many people are now renting as a long-term lifestyle choice.” Heron says that it is not dissimilar to other countries such as in the US and Germany where the private rented sector houses a greater percentage of the population and where it is regarded as having a strong positive influence on the economy.
The emotional incentives for choosing somewhere to live are also shifting. People previously enjoyed the freedom of being able to do what they wanted in their homes. Now priorities have changed. “Young professionals would now
rather rent in a nice apartment in Notting Hill than pay something equivalent for less under a mortgage,” says Fitzgerald. “If they lose their job
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