Half of First-Time Buyers Unaware They Can Borrow Up to £40,000 More: What Landlords Need to Know

Why This Matters to Landlords

Recent research by Mortgage Advice Bureau (MAB) reveals a significant knowledge gap among first-time buyers (FTBs): about half are unaware they can borrow up to £40,000 more than last year. This is largely due to evolving lender criteria and the increased availability of 5% deposit mortgages. For landlords in London, where FTB activity heavily influences rental demand, this has direct and important implications.

The Impact on Tenant Demand and Market Dynamics

Many FTBs delay buying because they overestimate deposit requirements and underestimate how much they can borrow, often spending more than six years saving for a deposit. This prolongs their time renting, which sustains rental demand but may limit turnover and rent growth potential.

MAB’s research also shows nearly half of aspiring buyers would purchase immediately if mortgage payments were comparable to current rent. Affordability remains a key obstacle. As lending criteria shift and 5% deposit mortgages become more common, landlords may see changes in tenant turnover and demand patterns.

Practical Implications for Different Landlord Profiles

• Single-unit landlords and HMOs: May see stable demand as FTBs rent longer but should prepare for potential tenant turnover if mortgage affordability improves.
• Portfolio landlords: Should monitor local FTB activity carefully; increased borrowing capacity could accelerate sales by accidental landlords or downsizers.
• Accidental landlords: Tenants may be more equipped to buy, which might affect long-term rental income.

What Landlords and Letting Agents Should Do Now

1. Update Tenant Communications: Refresh materials to include current mortgage lending options, emphasizing 5% deposit mortgages and increased borrowing limits.
2. Encourage Early Mortgage Advice: Advise tenants considering buying to seek mortgage advice promptly to understand their borrowing capacity.
3. Train Letting Staff: Equip teams to address misconceptions about deposits and affordability and to refer tenants to reputable mortgage advisors.
4. Monitor Lender Criteria Regularly: Stay informed as lending rules evolve quickly to keep advice accurate.

Next Steps for Landlords

• Hold team briefings to discuss recent mortgage market developments and update tenant materials.
• Establish partnerships with local mortgage advisers for tenant referrals.
• Conduct tenant surveys to understand buying intentions and tailor communications.
• Review portfolio strategies considering potential shifts in tenant turnover and demand.

How Rentals & Sales Can Help

Our Landlord Intelligence Hub offers portfolio reviews and compliance audits incorporating such market insights. We assist in refining tenant engagement strategies, updating informational resources, and training letting teams. We also provide pricing strategy expertise to help adapt to changing rental demand as the first-time buyer landscape evolves.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Landlords should seek professional mortgage and legal advice tailored to their specific circumstances.