Bob Young is managing director of CHL Mortgages
As has been widely expected for some time, the Funding for Lending scheme (FLS) was extended recently and the expansion represents good news for the buy-to-let industry for a number of reasons.
Whereas previously the subsidised funding was earmarked for residential borrowers, the widened remit means that property investors can also now benefit from the fact lenders can access cheaper tranches of funding.
Opening the scheme to non-bank lenders also means that these smaller institutions should be able to provide more of a challenge to their larger counterparts and it is buy-to-let landlords who stand to benefit from more competitive rates.
The scheme itself has been extended to 2015 which gives it more of a chance to have an effect on the market, especially as it has taken a while for the trickle-down effect to borrowers to be noticeable from last year’s launch.
Of course, any noticeable gain to the buy-to-let market is dependent on lenders passing on the savings in funding to borrowers but landlords have already been indirectly benefiting from the scheme so there is nothing to suggest keener rates won’t follow. When the initiative was first launched last August the average buy-to-let rate stood at 5.09% and it has since fallen to 4.28% which suggests lenders were already diverting drawn down funds towards property investors anyway.
After performing such a volte face on this scheme, it will be interesting to see if the Help to Buy proposals are widened to include landlords at some point, although this remains unlikely at present. Either way, the FLS u-turn and the Build to Rent proposals should ensure that the private rented sector is set fair for the foreseeable future.
It’s not all sweetness and light though and, as is always the case whenever the buy-to-let market receives a helping hand, the first-time buyer apologists can be heard gnashing their teeth.
Despite the fact the scheme’s remit is being widened and made more comprehensive, the cynics seem to think including landlords in the mix is at the expense of potential homeowners.
There is more than enough capacity in the market to satisfy both types of borrowers, yet the suspicion remains in some quarters that this Government decision will be to the detriment of first-time buyers.
I’ve always reasoned that a healthy mortgage market needs all of its component parts firing on all cylinders and one sector’s success doesn’t have to necessarily compromise another’s. It’s worth remembering that not all individuals want or can afford to buy regardless of State schemes, so a steady supply of rental properties is still very much needed. It’s also worth bearing in mind that with first-time buyer activity levels at a five-year high before the Help to Buy scheme has even been introduced, new borrowers aren’t as hard up as some of their supporters seem to suggest.
Wherever your allegiances lie, we should be grateful that the Government is attempting to inject some life into the mortgage market rather than sitting back and watching it flat line. The latest schemes and measures may not have the desired effect, but there is certainly no harm in trying.
