There has been a growing interest in the government’s Right to Buy scheme as data showed brokers searched for lenders’ criteria on the scheme more times in July than any other previous month.
The data from Knowledge Bank, a criteria searching system for mortgage brokers, showed Right to Buy was the fourth most searched for lender criteria in July — the first time it had ever appeared in the top five searches.
According to the searching system, the rise in searches followed prime minister Boris Johnson’s hints earlier this month that he wanted to extend the Right to Buy scheme to housing association tenants, having previously suggesting it had no place in modern housing policy.
The scheme currently exists for council tenants to buy their properties at a discount, the size of which is determined by how long the tenant has lived in the property.
Tenants can apply to buy their council home if it’s their only or main home, they are a secure tenant, have no legal issues with debt and they have had a public sector landlord for three years.
The discount for a house ranges between 35 per cent and 70 per cent depending on how long the tenant has been a resident there, while for a flat the discount sits between 50 per cent and 70 per cent.
Chris Sykes, mortgage adviser at Private Finance, thought consumers were asking their broker about Right to Buy because they were looking for security in the lead up to Brexit, coupled with low house prices and attractive mortgage deals increasing the number of consumers who could potentially afford their property.
But Sarah Drakard, independent financial adviser at Cruze Financial Solutions, thought it was more likely down to a rise in the number of young potential property owners who had struggled to get on the housing ladder, trying “any means possible” to achieve that goal.
She said: “I have experienced young professionals, who may have been tenants within a family member’s council home for a few years, try and get on the housing ladder using Right to Buy.
“Perhaps where younger people are seeing there are no other options and they’re just trying to make Right to Buy work.”
Knowledge Bank’s findings also showed interest-only mortgages appeared for the first time in a year, mirroring research earlier this month which showed brokers thought interest-only products were still popular and accounted for about a fifth of sales.
|Most searched-for lending criteria by brokers, in each mortgage market|
| ||RESIDENTIAL||BUY-TO-LET||SECOND CHARGE||EQUITY RELEASE|
|1||Maximum age at end of term||First-time landlord||Maximum loan-to-value||Grade II listed buildings|
|2||Self-employed – one year accounts||Lending to limited companies||Mortgage or secured loan arrears or defaults||Ex-local authority houses|
|3||Defaults – Registered in the last three years||Minimum income – interest only/Part and part single applicant||Capital raising – business purposes on second charges||Solar panels|
|4||Right to Buy||Requirement to be a homeowner||Mixed-use properties/part commercial||Ex-local authority flats|
|5||Interest-only||First-time buyers||Payday loans||Non-standard construction|
Ms Drakard said she was “increasingly seeing” older and more experienced borrowers opting for interest-only mortgages, while Mr Sykes said there was “definitely more flexibility” with lenders in the interest-only space.
Mr Sykes said: “It’s more of a professional client or an older borrower opting for interest-only products. I think it’s down to people wanting to make sure they have affordability in the future if anything does happen, to keep their monthly costs down.”
In the buy-to-let sector ‘first-time landlord’ and ‘first-time buyers’ both made the top five search in terms of buy-to-let.
Mr Sykes thought this was down to the fact first-time landlords market was very niche, so brokers had to do more research, but also because more first-time buyers were opting for the buy-to-let sector over the residential market at the moment.
He said: “I’ve got a few clients who cannot afford to buy in London, particularly the type of property they want, but are keen to get on the housing ladder.
“One way they get around this is to purchase a buy-to-let property up North, perhaps in their university city, and rent it out. This way they’re on the property ladder and get an income from it, but get to stay renting somewhere central in the city.”
According to Ms Drakard, the reason more first-time landlords were coming to the market was because more experienced landlords were holding off on increasing their portfolios due to the “tricky” buy-to-let landscape at the moment.
Landlords have experienced multiple tax and regulatory changes in the past few years — from a 3 per cent surcharge in stamp duty to reduced mortgage relief — which has triggered a number of landlords to sell up.
Nicola Firth, chief executive of Knowledge Bank, said: “Our tracker reveals a few shifts this month with interest-only making an appearance in residential searches for the first time this year, most likely as a result of a several new products and criteria changes to this sector.
“It was outstanding to discover that we have seen almost 30,000 mortgage criteria changes year to date, which just goes to show the pace at which our industry is making changes.”
Ms Firth said it was “simply not possible” for any broker to remember the 91,000 pieces of criteria, and that even the best help desks would struggle to update the 28,524 changes the industry has already had in 2019.
By Imogen Tew
Source: FT Adviser