Private landlords are in turmoil after recent recommendations by the Bank of England suggest dropping the affordability test for mortgage lenders. This move could spell the end of the buy-to-let market as we know it, suggests leading mortgage advisors, Sterling Capital Group Ltd.
Historically, borrowers have been subject to two test recommendations: the ‘flow limit’ which limits the number of mortgages that can be extended at loan, and the ‘affordability test’ which specifies the stress interest rate for lenders. The tests were originally put in place after the 2008 financial crash as insurance against further economic downturn.
The removal of such tests means that those who dream of owning a home can borrow more when applying for a mortgage, a perfect opportunity for first-time buyers looking to get their first foot on the property ladder after years of living in a housing market pitted against them.
Without these tests, more first-time buyers will be able to get out of the viscous rental cycle and invest in their first property.
Ashlee Reid, founder of Sterling Capital Group Ltd says, “This is good news for first time buyers. Times have changed, it’s now easier for homeowners to remortgage on a more competitive rate with product transfers and new deals from other providers, however this will drive up property prices due to high demand, but at the same time give a lot of first-time buyers the opportunity to get on the ladder.”
Although the Bank of England’s recommendations signal good times ahead for first-time buyers, the outlook isn’t as positive for landlords and those in the buy-to-let market.
The new policy changes will be specifically targeting renters paying hefty sums every month because they can’t afford to buy, a direct issue for landlords who have been able to justify hiked-up rent prices due to the current housing market. With less renters on the market, landlords will not be able to maintain their current rent levels, and those operating in the buy-to-let market will no longer be able to benefit from the previously large pool of renters looking for somewhere to live.
For first-time buyers looking to take advantage of this situation, Sterling Capital Group Ltd are a team of professional mortgage advisors who can take you through the whole process of buying your first home quickly and efficiently.
To find out more about Sterling Capital Group Ltd, visit http://www.sterlingcapitalgroup.co.uk