Building Society says ‘no’ to second homes and insists mortgages ‘should go to first-time buyers’
One of Britain’s biggest building societies is restricting mortgage offers on second homes in an attempt to help more buyers get on the property ladder.
Leeds Building Society said funding second properties was not ‘compatible with our purpose to put home ownership within reach of more people’.
The member-owned lender reassured customers it would use the spare capacity to renew its focus on other sectors, such as affordable housing and support for first-time buyers.
It will keep lending on buy-to-let properties and holiday homes, but only if they have people staying in them for the majority of the time.
Leeds Building Society said funding second properties was not ‘compatible with our purpose to put home ownership within reach of more people’
‘We’ve taken this decision after a great deal of thought as we don’t believe support for second homes is compatible with our purpose to put home ownership within reach of more people,’ said Richard Fearon, chief executive of Leeds Building Society.
‘Second homes reduce the number of properties available for people to live in at a time when there’s a wide consensus that housing supply in the UK is inadequate.’
He added that ‘any home other than a main residence usually lies empty most of the time, which does not serve the local community or contribute to the local economy’.
Leeds Building Society, Britain’s fifth-biggest mutual, usually lends several million pounds every year to fund second-home purchases. According to the English Housing Survey, there are 495,000 second homes in England.
But the debate over whether homeowners should be able to buy extra property has been reignited in recent months, as the cost of living crunch has laid bare the divide between those with spare savings and those who are struggling to make ends meet.
Activity in the housing market is being sustained by those who already own property or managed to build up savings during the pandemic.
This has pushed the average UK home to a record high of £294,845 in June, according to Halifax’s House Price Index.
The rate of home ownership in England had slipped from 71 per cent in 2003 to 65 per cent in 2019/20.
Earlier this month, the Welsh government gave sweeping powers to councils to ‘set a ceiling’ on the number of second homes which can be bought in their area.
Loan costs set to surge
Millions of homeowners face mortgage bill hikes amid fears interest rates will rise again next week.
The Bank of England base rate currently stands at 1.25 per cent, having risen five times in the last six months.
Borrowers with variable rate mortgages are already paying hundreds of pounds more a year as a result. But economists predict base rate will increase a further 0.5 percentage points to 1.75 per cent next week to fight soaring inflation.
Investment platform AJ Bell estimated the move would add £752million to UK mortgage bills and cost a homeowner with a £150,000 variable rate loan an extra £80 a month.