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Favouring B2L is unfair on first-timers

Abbey hit the headlines earlier this month with the news that it is to offer up to 5 x borrowers’ salary because income is not keeping up with spiralling house prices.

While the consumer press went into overdrive about this announcement I’m sure most brokers didn’t bat an eyelid.

The reason Abbey created such a noise is that it is seen as the first mainstream lender to state in black and white that it will go up to 5 x income. But brokers know it’s not the only one.

Other big names such as Alliance & Leicester, Royal Bank of Scotland, Cheltenham & Gloucester and the Yorkshire have been doing this for years.

More specialised intermediary-only lenders are flexible in what they will offer and can look at borrowers’ individual circumstances.

And the truth is that Abbey’s move will do nothing to help first-time buyers. A look at the small print shows that to get 5 x income a borrower must already have a mortgage, have a perfect credit record and earn £60,000.

I feel sorry for the wannabe first-time buyers who will have read the headlines and rushed to their nearest Abbey branch only to leave deflated.

I remember how disheartened I felt when I went to a big London-based broker that shall remain nameless, to be told there was nothing it could do for me unless I came back with a deposit of at least 5%. Since I don’t have a rich mummy and daddy there was precious little chance of that happening.

Luckily I found a decent IFA who used his skill and experience to find a lender suitable for me and I managed to buy my one-bedroom flat.

A good broker is invaluable. While big lenders can grab column inches by doing very little, a broker who knows the market can do their bit to help first-time buyers.

But while buyers are struggling, lenders are making it easier for buy-to-let landlords.

In the past few weeks several lenders have cut their rental cover requirement to 100% from the previous average of 125%. This, in theory, means a landlord needs no surplus income from his rental compared with the mortgage. So more landlords will be able to go on snapping up the properties that first-time buyers could afford.

This is unfair, and the situation is unlikely to be eased by the growing pressure on the Monetary Policy Committee to keep raising the base rate.


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