First-time landlords locked out by mortgage freeze

First-time buy-to-let landlords are finding themselves locked out of the market as lenders pull mortgage deals.

The credit crunch means first-time landlords are having to raise ever larger deposits to get their first step on the buy-to-let ladder, however professional buy-to-letters are being buoyed by falling house prices and rising rental demand, according to The Mortgage Works, a specialist lending subsidiary of Nationwide.

A survey of 3,179 mortgage intermediaries revealed 44 per cent believed professional investors would continue to acquire properties in the coming months.

A consensus also emerged such landlords may use the present moderation in prices in the UK property market to snap up some bargain purchases.

However, brokers were less buoyant when it came to first-time landlords, with 62 per cent believing novice landlords would cease purchasing new properties in the coming year, and over half, 58 per cent, suggesting fewer first-time investors would enter the buy to let sector in 2008.

"Intermediaries are on the frontline of the mortgage market and so are well placed to assess the prospects of professional landlords," said Andy McQueen, managing director of The Mortgage Works.

"Clearly the current climate is not ideal for first-time landlords, given the limited number of deals available to them, but experienced investors may find excellent opportunities in a cooling housing market to purchase additional property."

A further 44 per cent of mortgage intermediaries felt professional investors would maintain their current portfolios, with only 12 per cent suggesting investors would seek to sell some of their properties.

The outlook in terms of both rental yields and tenant demand was also strong.

Some 40 per cent of intermediaries suggested yields would rise this year, and an overwhelming 94 per cent of intermediaries expecting tenant demand to either remain static or rise in some cases.

Additional demand is likely to be caused by first-time buyers delaying a property purchase while prices continue to fall.

The findings support those of the Royal Institution of Chartered Surveyors (Rics), which reports only two per cent of landlords are likely to make a sale in the near future.

Daniel Barnes. Additional reporting Chris O'Toole