FIRST-TIME BUYERS ENCOURAGED INTO BUY-TO-LET
Sam Meadows, writing in the Telegraph (13 December 2017), reports that ...
Barclays is the latest lender to encourage first-time buyers into buy-to-let
Barclays has become the latest major lender to allow first-time buyers to borrow money to buy a property to let rather than to live in.
It joins NatWest and a number of smaller building societies in offering buy-to-let mortgages to younger buyers who do not already own property.
This sort of offer, the bank claims, could help young people living in expensive regions like London, who are priced out of their local area, by allowing them to get on the property ladder in a cheaper region. They would thus earn a rental income and participate in potential house price growth.
Mortgage brokers were notified last week and Barclays's policy changed on Thursday. The note reads: “This change offers an alternative way of helping first time buyers get onto the property ladder.
“For example, a young professional currently working and renting in an area with higher than average house prices, such as London, might be looking to purchase a property to rent out as an investment.”
A Barclays spokesman said: “Barclays is a responsible lender and we’re always looking at ways to innovate and open up access to home buying. First time buy-to-let will give someone who does not have a mortgage an opportunity to get onto the property ladder.”
Barclays isn’t the first major lender to enter this market. According to Aaron Strutt, of Trinity Specialist Financial, the broker, NatWest will accept applications from first-time buyers and assess affordability on its usual criteria: expected rent meeting 5.5pc of 135pc of property value.
Other lenders offering these mortgages include Clydesdale Bank and Vida Homeloans.
Mr Strutt said tighter restrictions around buy-to-let lending, meaning lenders now take personal income into account when calculating affordability, have made it easier for banks to offer this kind of service. He also said this could be an attempt by Barclays to make up for some of the buy-to-let business lost as the sector has slowed following an ongoing Government crackdown.
Will these buyers pay stamp duty?
One factor that anyone taking advantage of this offering will need to note is that they will not qualify for the exemption from stamp duty for first-time buyers announced at last month’s Budget.
While anyone buying their first house to live in will pay no duty, as long as it’s worth less than £300,000, the exemption doesn’t extend to buy-to-let. This would mean £5,000 of tax would be payable on a transaction worth £300,000.
Additionally, when buyers eventually come to buy their own home you would be liable to pay the 3 percentage point surcharge as it would count as an additional property. Anyone selling a “main residence” doesn’t pay, but a buy-to-let would not qualify.
Earlier this year Telegraph Money reported the story of Sophie Fernandez who was saddled with an extra £15,000 in stamp duty when she came to buy her first home in London, because she already owned a buy-to-let in Loughborough.
What are the best buy-to-let rates currently on the market?
According to data firm Moneyfacts, Barclays Mortgage currently has the lowest rate for buy-to-let mortgages on five-year fixes: 2.17pc. But the buyer must have 40pc equity.
NatWest is slightly higher at 2.18pc with the same loan-to-value but a lower arrangement fee, £995 compared to Barclays' £1,950.
For two-year fixes Platform is the cheapest at 1.34pc, while TSB has offers at 1.39pc and 1.44pc. All three deals are for those with 40pc equity.
Platform also has a two-year variable tracker currently at a rate of 1.49pc.