Sell Your House when Investors are Buying

December 18, 2012 by  
Filed under Business

Since the turn of the millennium house prices in the UK have doubled. However incomes have still remained the same, meaning many UK citizens can’t get on the property ladder. It’s not a problem for those who have already owned a home as they have already benefited from a double in their house value and they have enjoyed a huge equity increase that’s often more than what they have earned from their daily jobs. For those who have not managed to get their foot on the ladder they are now finding themselves in an even tougher position where they are still earning the same amount as many years ago but property prices are now twice the price. This article will now look at who is to blame for this rise in house prices and will show why it is not relative to incomes any more.

Firstly, once it became apparent that house prices can only rise in value many normal home owners scrambled to get their desired properties and were prepared to pay top prices with the assumption that it doesn’t matter what price they pay now as prices can only rise. Not only that but the availability of 100% mortgages, even if you had a poor credit score, meant that an influx of buyers swamped the market and at one point in London there were an average eight buyers wishing to purchase one property which is particularly convenient if you need to sell your house fast. Obviously nowadays, less people are able to attain a mortgage and the banks have higher deposit requirements of at least 15% so there are far fewer buyers available. This has been the largely reported blame for the property bubble bursting and we all remember the term “sub prime mortgages” being the blame, there is another factor that can be blamed for this un-relative to income increase in house prices and that’s the rise of the Buy to Let property investor as will now be discussed.

Buy to Let Mortgages have a completely different letting criteria when compared to your normal residential mortgage. Rather than being based upon incomes they actually have no relation to personal income whatsoever. Instead when a Prospective Landlord applies for a loan they base his borrowing ability on the house itself. When granting a mortgage the lender looks for a clean credit record from the borrower and the rental yield of the property. If the rental yield is at least twenty percent higher than the monthly mortgage payment then the loan will be granted. Before BTL mortgages became available house prices would stay relative to incomes meaning that anyone with a normal job could afford a normal property. Nowadays, the large majority of the employed workforce are out priced and there’s clearly a gap that is continuing to widen. If the rise of property investors is to blame then restrictions should be placed on their ability to achieve finance, if this were combined with higher incomes and more easily attained finance for residential buyers then houses may become more affordable.

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