A building society which has taken the unprecedented step of stopping lending on second homes has been sharply criticised by a leading lettings agent.
Over the weekend the Leeds Building Society announced that while it would still offer buy to let mortgages it would not - with immediate effect - offer loans for other additional properties. Instead it says it will focus on other sectors, such as affordable housing and help for first-time buyers, to help fulfil its purpose to put home ownership within reach of more people.
The news has been slammed by David Alexander, chief executive of DJ Alexander - part of the Lomond Group which is the largest lettings agency in Scotland - who says lenders intervening in the housing market for social, moral, or societal reasons were operating beyond their remit.
Alexander says the society’s stated reason that second homes are one of the causes of housing shortages in the UK is, at best, disingenuous and, at worst, inaccurate.
He says reports from both the Westminster and Welsh governments have found only inconclusive evidence of the impact of holiday or second homes on affordability and the wider housing market.
“The Leeds Building Society have made a bold statement by refusing to lend to second home buyers, but you would have to question whether it is their role to intervene in the housing market in this way. The notion that not lending to second homeowners will allow more people to join the housing market does not really make sense unless they hope that prices will fall as a result of their intervention.
“This is extremely unlikely as the popular tourist destinations where this is a major issue are unlikely to be impacted by this change in policy. They will remain popular as long as people want to live there, and they will find other companies willing to lend to facilitate this.
“St. Ives, which has a restriction on second homeowners, has seen prices increase by 26 per cent since the policy was introduced in 2016. Indeed, both the Westminster and Welsh reports found that interventions rarely produced a tangible difference.”
Alexander says he is concerned at where this new ‘moral purpose’ will end.
He concludes: “Will banks refuse to lend for car purchases or holidays because of the impact of these purchases on the climate? Or should they not fund smokers and those with an unhealthy lifestyle who will ultimate produce greater strain on the NHS? These are not decisions for financial institutions and will make no difference to the market.
“At the heart of this issue is supply and demand. Supply has not kept up with demand, so prices have risen, and affordability has become more difficult. Increase the supply of housing in popular areas and you will soon see prices level off and even reduce making more homes affordable to a wider range of people. Intervening in the market always has unforeseen consequences and should not be the function of lenders but left to policymakers.”
In a trading statement at the end of last week, Leeds Building Society chief executive Richard Fearon said: “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.
“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 to meet demand and needs to be increased."
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Dont panic Mr Mannering, theres 100's of other providers that will.
So…..a lender that doesn’t want to lend money ! More virtue signalling from this lender.
I am a director of a finance company and as long as the customers can repay, it’s really not for us to tell them how to spend it. What a donut!
Well done Leeds BS. A socially responsible decision, lets hope more lenders follow suit.
Is this the same man who owns an estate agency as well as a lettings agency and wanting to have his cake and eat it too? Like leaving the fox in charge of the chicken coop? Why post the opinions of people with vested interests?
What Leeds BS do as a policy is up to them, matey talks about building when let's give a ball park figure of 700,000 second homes hypothetically coming to market. Oh look, supply has suddenly increased and maybe just maybe those looking to borrow will keep a loyalty with such lenders and the momentum builds. Fair play to Leeds for addressing a chronic issue and putting their head on the block if it fails. I don't think a tear will be shed for the second home buyer. Alternatively let's just plaster the beautiful land of say here in the South West with pants build boxes where the infrastructure isn't sufficient. Moron.
Mr Phillips, most second homes come on the market, when the owner/s die !
You don't have to be so formal Mr Morris! So, example.... dead man's second home in let's say... Appledore in Devon comes back on to the market, who do you think realistically snaps said property up ? That's right, another second home buyer! Another over the guide price offer that can't be matched, pushing up prices further locally that can only be within price range of those already wealthy. The question has to be, why does any human NEED a second home when there isn't the stock to provide for the demand by those just trying to even enter the market with a view to view a property as a home and not an investment or additional vanity purchase. Again, do you think the solution is plastering our land with poor quality boxes?
People seem to be under the impression that people with second homes choose to leave them empty or only use them occasionally.
Don't forget that some coastal local authorities are resisting their owners letting large second homes as HMOs because they want to avoid anti-social behaviour, an influx of refugees into the area, and a change in the character of a seaside resort.
The issues are more complex than people realise.
Mr Phillips, there was a surplus of social housing until the borders were thrown open, and illegal immigrants welcomed here. Unfortunately it's an international housing housing market, consequently people from all round the world are buying property in Britain.
This David Alexander sounds like a massive vested interest and to be ignored. Well done Leeds BS.
Mr Brian Morris,byou are naive, basically most people have a vested interest,bincludung you ! A building society should act under the terms of its remit, not involved in postureing to get free publicity. Building societirs are degrading savers money, ie robbing them !
Hmmm. Edwin - it would help me take your point more seriously if you could spell. This David Alexander sounds off once a month (‘slams’) all sorts of people. Think it’s pretty obviously who is posturing for publicity.
Who r u Brian Morris ? Apart from being a sarcastic commentator.
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