A building society says it is considering ending its policy of lending to buyers of holiday lets.
Martese Carton, the director of mortgage distribution at the Leeds Building Society, says her company has calculated that across the UK some 426,000 prospective first time buyers will be price ed out of the housing market over the next five years. She says this equates to 233 people per day.
Writing a column in the Yorkshire Post newspaper, Carton claims first-time buyers today face challenges incomparable to previous generations - “a triple combination of historically high house prices, high deposit values, and high mortgage repayments.”
In detail, she says this means that the recent cocktail of increased interest rates and rising deposit requirements for FTBs has led to average deposit values reaching £73,100 by March 2023, equivalent to some 26 per cent of total purchase price.
Those able to buy a first home will need higher incomes than ever before, with mortgage repayments amounting to 29 per cent of their take-home earnings, compared to 22 per cent in 2022, even though those who can afford to become first-time buyers in 2023 are earning more than their equivalents in any previous period.
She writes: “We risk a lost generation of first-time buyers if we don't also take steps to improve supply immediately. That’s why Leeds Building Society became the first national mortgage lender to stop providing mortgages for residential second homes. We did so to be part of the solution to the housing crisis, by prioritising helping people to buy their first home.
“Further supporting first-time buyers by ending new lending for holiday lets, where there is local support for this action, is the next option that we are pursuing. Our question is, can we be a valuable partner to local authorities seeking greater control against the growth of holiday lets?”
Carton says there is a balancing act between the benefits of holiday lets to local economies and the detrimental impact they can have on housing for residents.
She says the society’s proposal, still under consideration and not acted upon, would only apply to new mortgage lending – existing customers would remain unaffected – in specific locations as agreed with local councils.
“A 12-month pilot scheme will allow time to assess the impact before seeking to extend to other areas. To those who ask why we are doing this, my reply is simple. Every generation deserves a place to call home. We need real change in the housing market; we need homes to become more affordable, accessible, and available.”
Carton concludes by admitting that the long term solution to this and related housing issues is to build more homes.
In August 2022 the society said it would no longer lend for the purchase of personal second homes, but would continues to offer buy to let mortgages and loans for holiday homes available to let for over 24 weeks a year.
Chief executive Richard Fearon at the time said: “We’ve taken this decision after a great deal of thought as we don’t believe support for second homes is compatible with our purpose to put home ownership within reach of more people. Second homes reduce the number of properties available for people to live in at a time when there’s a wide consensus that housing supply in the UK is inadequate to meet demand and needs to be increased."
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What is needed is the right balance of types of properties - main homes / second homes / airbnb / holiday homes. The best way to achieve this would involve having the right tax incentives / disincentives. Individual lenders taking this sort of stance isn't really going to help the wider picture. Lenders should not be dictating housing policy.
I think there's a bigger picture here. (Not sure what though?) No way would a lender block mortgages on second homes, short term let properties etc. They're not gong to miss an opportunity to make thousands in interest rates.
I'm sure banks will still be happy to take the business
Maybe it is because there are going to be council tax penalties on second homes and planning permission required for holiday lets?
Owners may have to sell their properties?
Clearly the Leeds BS is not virtue signalling. May be, however, they might like to consider "donating" some of the profits they make from second home mortgages etc..... towards increasing UK housing stock. Just a thought.
I’m not sure about the figures quoted here ( no real context given) and even less sure that this is the hardest time for FTB’s either. Getting on to the housing ladder has always been challenging.
Those of us with memories of the 70s & 80s can recall far higher interest rates, far lower earnings ratios, far fewer
lenders and deposits of 10% plus.
I agree with Shane, ‘there’s something else going on here’ probably of a political nature!
Ever since the SNP outlawed mutually acceptable fixed term tenancies in December 2017, I have been waiting on ( hoping for) mortgage companies to refuse to supply BTL mortgages to Scottish landlords deprived of having full control over their own properties.
I accept that they still have the comfort that current tenants can be evicted to allow the sale of the mortgaged property although I think this might have been weakened from mandatory to discretionary since COVID "emergency" legislation wasn't repealed as originally promised.
However they don't seem to have cottoned on to the difficulty Scottish landlords now have in gaining access for essential maintenance now tenants know they're virtually fire proof.
Hopefully the market, in the shape of the BTL providers, will prevent English and Welsh landlords from suffering in the way Scottish landlords have for the last six years?
On the bright side, the massive shortage of available properties to rent in Scotland has allowed me to raise the monthly rent on my best 4 bedroom flat from £1500 in June 2017 to £2800 in June 2023. The rent cap only protects those staying on under the same tenancy agreement but new tenants are desperate to pay full market rates or more to secure the few PRS properties available currently.
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