Mortgages For Business - Buy To Let Mortgages

Economy ‘should recover’ after rate cut

mortgagesforbusiness — Wed, 12 Nov 2008 15:23:17 +0000

The economy will be helped to recover by the Bank of England’s interest rate cut, it has been claimed. Vicky Redwood from Capital Economics stated that last week’s base rate cut will increase confidence within financial markets, adding that rates are “probably going to fall a lot further”.

“We think rates could fall to at least one per cent, we certainly wouldn’t rule out them falling below that,” she commented. Such a drop in interest rates could lower the cost of buy to let mortgages.

However, Ms Redwood warned that confidence would only increase if “policy makers are willing to pull out all the stops” to aid the economy.

The Bank of England’s monetary policy committee (MPC) met on November 6th and voted to slash the base rate to three per cent. This “significant” reduction was required to help the MPC meet its inflation targets, the committee revealed. Angela Knight, the chief executive of the British Bankers’ Association, said that its members were “grateful” for the support they have received from the government and the Bank of England.

“Banks are committed to doing their part to help rebuild the UK economy as well as ensuring we help and support all our customers,” she commented.

Ms Knight acknowledged that many people are “concerned about making ends meet” in the current climate and that the interest rate cut is to be welcomed. Ms Knight also recommended that anyone who is struggling to meet repayments should talk to lenders “sooner rather than later”.

Investors with buy to let mortgages are set to benefit from the high street banks’ reaction to the base rate cut and a fall in Libor, the interbank lending rate. Those on standard variable deals that track the Bank’s base rate will automatically benefit from the reduction, while lenders may be prompted to make further cuts across their mortgage portfolios. Keshav Thukaram, Managing Director of the SmartLandLord website, said the government has made “clear signals” to banks and building societies that they must return to 2007 levels of lending.

“New mortgages and new property sales will not gather momentum unless the rate cuts are passed on to landlords for their new mortgages and remortgages,” he commented.

Meanwhile, the National Association of Estate Agents has stated that any banks that do not pass on the base rate cut are acting in defiance of the government’s wishes.

Buy to Let Market Review – August 08

mortgagesforbusiness — Thu, 18 Sep 2008 09:58:34 +0000

Writing an article on the state of the Buy To Let (BTL) sector in late August 08 for a September the 1st deadline is always a challenge as many property professionals take an extended holiday break (your Editor included) in July and August. And of course summer 2008 has seen home owners, landlords and lenders all take a collective back seat as they wait for outcome of the ill-judged Treasury leak about potential changes to Stamp Duty.

Arguably many BTL properties fall below the £125,000 threshold, so would not be impacted, but the sale of some of these properties may be held up as buyers moving up the property ladder await any reduction in Stamp Duty on higher value properties. The potential impact of this political gaff should not be underestimated since it came at just the moment when investors and lenders were finding common ground and activity was starting to pick up.

Putting that problem to one side for the moment there are good reasons to believe that the BTL sector is weathering the storm:

Tenant Demand

Evidence of good rental growth across the UK can be found not only in the latest RICS Lettings Survey with a headline of “Lettings market shines bright in housing gloom” but also in Paragon’s Buy To Let Index for July where yields across the UK are 6.4% with average growth in the last year of 9.3%. Additional demand is being driven by the reduced availability of mortgages at 100% or above for first time buyers who will need to rent until they can save up the necessary deposit and with higher interest rates being charged on borrowing at thee 95% level , it may be more expensive to pay a mortgage than rent for the time being.

Mortgage Availability

One year on from the credit crunch, the BTL sector has fewer lenders with tighter credit criteria and risk based pricing encouraging landlords to invest more capital in return for better interest rates. Pricing as low as 5.09% for a 2 year fix at 60% loan to value with higher pricing is applied by those lenders still willing to lend to 85% but with increasing dependency on retail deposits to fund new lending the cost is reflected with rates more in the range 6.5% to 7.5%.

Mortgage Funding

Current funding is based on the known performance of the existing BTL mortgage book and the recently released CML figures look relatively benign with only 1.1% of loans in arrears over 90 days compared to the broader market figure of 1.33% but still up from 0.73% at the end of 2007. Any significant deterioration would cause lenders to re-trench further at a time when BTL landlords are probably the best hope for the property market absorbing the CML predicted 28,000 repossessions in the second half of the year.

Preferred Property Sectors

The new homes sector had always been popular with investors in a rising market – where there was no property chain and the opportunity to buy off plan with completion up to eighteen months away held out the prospect of capital appreciation for little risk in the early years of the new millennium. By early 2007 some developers were creating artificial incentives to lure in investors leading to concerns over the true value of developments where upwards of 40% of the units were sold to investors. This has led to rental problems and geographical concentration risk and lenders have placed a 75% LTV restriction and full transparency on the component parts of the transaction. This is bound to impact the house building sector and the results of Taylor Wimpey on 27 August announcing a 96% fall in pre-tax profits and exceptional items of a further £1.5Bn must reflect some of these issues. Effectively the development of sites has mostly ceased as builders concentrate on selling existing stock before developing subsequent phases. Whilst house prices have eased there are not sufficiently large volumes of properties being sold to suggest a collapse of the broader market.

Market Confidence

Paragon’s July Trends Review reveals that investor sentiment towards acquiring further property remains strong with twice as many landlords looking to add properties than intending to sell. This is driven by a belief that they can secure a lower price as well as being high tenant demand being a key factor for 39.3% of them.

Feel good Factor

There is one additional confidence element that impacts the whole country and that is the somewhat unexpected “feel good factor” that has been created by the well deserved success of Team GB in Bejing. Not only has it dominated the headlines and pushed away the doom and gloom headlines on the property market and economy at large but has created a genuine interest in London 2012. When France won the Football World Cup in 2006 the GDP growth in the next quarter was 0.5% above the predicted rate. The benefit to the UK may last sufficiently long enough for other potential positive measures to show through such as a Base Rate reduction of 0.25% in early November or, heaven forbid, the Government untangling the Stamp Duty fiasco with a stepped aligned on price bands and a raising of the “zero” band to £250,000 – is that too much to hope for ?

By Micheal Aglony

Tags: buyto let, mortgages, credit crunch, rental

The credit crunch bandwagon is treading on everyone’s hemlines

mortgagesforbusiness — Wed, 13 Aug 2008 14:13:02 +0000

Guest reaction post from Sarah Maple

I am not a financial expert far from it, it is hard to understand all of the implications that the credit crunch will bring or to predict the effects that it will have. When nearly every article in the papers this year on subjects from fashion to finance include the words ‘credit crunch’ it’s no wonder that most people are a little confused about it.

I even read an article in the paper yesterday about how hem lines are lowering as a sign of the economic downturn. What? I was sure that I only just saw an article in my monthly magazine telling me that very short hotpants were really in right now. See what I mean? Everyone is jumping on the credit crunch bandwagon just for the sake of not wanting to look like there not in with the ‘in crowd’. No one wants to admit that they don’t know what the credit crunch is even if they have to pretend that they believe it’s something to do with lowering hemlines. The resulting spew of articles are ultimately meaningless and barely interesting reading that would only make the pages of the Daily Mail on Saturday (I should know, I read it every Saturday).

That brings me to my next point. Has anyone noticed how the Daily Mail website has turned into the best celebrity gossip website around? Properly researched stories (in the name of journalism) unlike those glossy fashion weeklies grace the home page where you can check out scandals of the rich and famous. You can hang out their and read stories on anything from the effect of the credit crunch on buy-to-let mortgages to Sienna Miller getting harassed by the paparazzi.

I would like to buy an idiots guide to the credit crunch if there ever is one published. I think it would be a great one hit wonder that would sell very well in Waterstones; you would be the only author in the world hoping for economic instability to boost sales. Maybe I should write one myself and make a quick mint on the back of everyone’s hem line fears…

I can’t help but thinking that the more hype and fuss there is over this then the more panicky people are going to get. It’s like the rising price of petrol… Supermarkets have at last seemed to come to their senses and started to lower their fuel prices, of course this may be to offset the rising cost of food which still leaves me with the same choice; food or fuel?

Living in remote areas of the West Country where you have to make sure you have enough petrol to actually drive the lengthy distance to the nearest petrol station makes the proverbial hole in the pocket even larger. I fear that those of us in more lonely towns will have to set up self sustaining communities so that we never need to go into town for food or entertainment.

This idea is almost as good as the book…and I think you know what I mean by that.

Buy to Let Mortgage Lenders feel bite of Credit Crunch

mortgagesforbusiness — Thu, 17 Jul 2008 11:59:11 +0000

The onset of the credit crunch has limited the number of lenders in the commercial and business mortgage marketplace. New securitised lenders such as Commercial First have temporarily suspended all new lending.

The problems relate to conditions in the global finance markets rather then the strength of the businesses themselves. The lenders cannot find new funding at an appropriate price from the money markets and therefore have withdrawn until this situation has been remedied.

Stephen Johnson, sales and marketing director at Commercial First commented:

“Events in the market including the recent collapse of Bear Sterns have meant the offer for the business and additional funding have been withdrawn. Collectively we are another victim of a banking crisis that was unthinkable only nine months ago.”

However there still remains a huge range of lenders including banks and building societies that brokers can negotiate finance with. Investors shouldn’t fret as we are returning to the position of lending availability that was in the marketplace three years ago before the securitised lenders entered.

Commercial First focused particularly on transactions where the business has a limited track record or accounting information, these transactions will be more difficult to fund in the current marketplace. However in the commercial mortgage market because rates and terms are negotiable it is still plausible to find funding for these types of transactions.

Additionally investors should be aware some Buy to Let lenders have introduced commercial mortgage propositions such as CHL Commercial who offer a range of products through intermediaries.

To discuss your commercial or business mortgage needs please telephone our team on 0845 271 0955

Jonathan Moore writing on behalf of Mortgages For Business, specialists in buy to let mortgages and commercial mortgages. To find out more on current news in the buy to let market please visit http://www.mortgagesforbusiness.co.uk/

Inside Track close buy-to-let seminar programme

mortgagesforbusiness — Wed, 04 Jun 2008 13:21:21 +0000

Mortgages for Business says this should not be misinterpreted as wider buy-to-let market concerns

Inside Track has axed its buy-to-let property seminars in the wake of sliding house prices and tight lending conditions for new-build flats.

Mortgages for Business, the leading specialist buy-to-let mortgage broker, says that Inside Track’s exit from its property seminars should not be taken as a barometer of the health of the buy-to-let market.

Inside Track and its sister companies have promoted investment in city centre new build developments. These city centre new builds is the one area of the market where there has been a significant downturn, but this is not a new phenomenon. Many of the UK’s city centres have seen a glut of this type of property released without the anticipated demand. As a result prices and rental values have now dropped.

Lenders have over the past 18 months recognised this and tightened up their lending criteria or removed themselves completely from such classes of properties.

Jonathan Moore, Head of Marketing at Mortgages for Business, said: “Mortgage lenders have been paying particular attention at transactions where discounts are involved, and now scrutinise each transaction in order to gain a true market value.

“Solid properties such as student HMOs or terraced houses tenanted to young professionals remain a sound investment.”

The buy-to-let market is dominated by established portfolio investors. According to CML statistics the large portfolio landlord remains dominant with 13% of landlords owning 74% of the buy-to-let stock, and more strikingly, 53% of landlords own a mere 3% of the stock.

“Investors who choose to part with large sums of money investing in property they haven’t seen, in areas they do not know, and through third parties are likely to experience problems. You wouldn’t purchase shares or invest in a business without first doing some background research – it is the same with buy-to-let. We have always advocated the best research any investor can do is their own research rather relying on prepackaged solutions,” adds Moore.

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

BUY TO LET MORTGAGE MARKET SEES FURTHER CRITERIA CHANGES

mortgagesforbusiness — Wed, 04 Jun 2008 13:20:43 +0000

Renovated properties and deposit size are affected

Mortgages for Business, the specialist buy-to-let mortgage broker, is reporting a number of new criteria changes amongst the UK’s buy-to-let lenders which will affect funding for newly renovated properties classed as ‘new build’s and also the deposit size now required for most loans.

New builds which many lenders also classify as properties, flats or houses built or converted in the last twelve months have been a particular cause of anxiety for buy to let lenders, and it is increasingly common for lenders to refuse to lend on this type of property altogether. Capital Home Loans are the latest organisation to decline to lend on new builds including newly converted properties.

Jonathan Moore, head of Marketing at Mortgages for Business comments: “New builds is the one area of concern in the sector, particularly in some city centres where supply is currently outstripping demand. It is essential however not to judge the whole buy to let investment proposition on the performance of new builds. Established properties and particularly HMOs and flats above commercial properties provide good long term yields. The fact that renovated flats and houses in the last twelve months are classed as a new build may be of surprise to many investors”.

The second major change is the size of deposit required. Some lenders are now asking investors to put down larger deposits by lowering the maximum loan to value they will lend at. For example UCB Home Loans (the specialist buy to let lender of Nationwide) is asking borrowers to put down a 25% deposit, from the previous requirement for a 15% deposit. Meanwhile Irish Permanent has lowered their maximum loan to value to 80%, meaning there is a requirement for a 20% deposit. Mortgage Express (The UK’s largest buy to let lender according to Council of Mortgage Lender statistics) have also withdrawn their 90% loan to value buy to let products.

Jonathan Moore continues: “In the last five years buy to let lenders have lent at 85% loan to value, with many lending up to 90% loan to value last year. However some lenders are now introducing a maximum loan to value of 75% or 80%. The move is not widespread across the marketplace as yet but some lenders are making definitive moves to increase deposit requirements”.

First time buy to let investors are also likely to find their mortgage options decreasing. The Mortgage Works will no longer be lending to first time landlords, a stance also taken by UCB Home Loans.

It remains to be seen if these changes will become the market norm and if other lenders will follow suit.

Jonathan Moore continues: “The changes cannot solely be attributed to lender worries about the credit crunch and the need to ensure loans are as prime as possible. The credit crunch has meant fewer organisations are lending because securitised lenders are having difficulties securing funds at a competitive enough rate to re-enter the market. This means the lenders remaining are receiving a higher number of applications and as result have been lending in elevated volumes. We view these measures as a short term mechanism to lessen the volume of applications there are receiving, allowing them to achieve lending volumes they are more comfortable with”.

-Ends-

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

Buy to Let mortgages – changes you need to know about

mortgagesforbusiness — Wed, 04 Jun 2008 13:19:54 +0000

The last few months have seen some of the biggest changes to Buy to Let mortgage criteria since they were introduced in 1994. The so called ‘credit crunch’ has meant lenders are more selective about who they will lend to and the type of propositions they will lend on. There is an increasing focus on low risk quality propositions with lenders introducing criteria that filter out higher risk transactions. Lenders are increasingly seeking relationships only with those brokers who have a proven track record of delivering quality applications. The change in market dynamic will begin to highlight the calibre of brokers that landlords work with and this is something we welcome. If you haven’t been actively looking at the funding for your portfolio recently some these changes may come as a bit of a surprise. Below is a definitive guide to current changes, but be aware lenders are rolling out changes so fast the goal posts are continually moving.

Availability of mortgage products

According to March 2008 statistics from Moneyfacts the number of Buy to Let mortgages available has fallen 60% since the outset of the credit crunch. Much of the 60% can be directly attributed to the sub-prime market and the offerings from the securitised lenders. We expect to see an increasing number of investors asking for funding for certain property or tenant types, rather that asking simply for the best rates.

The Buy to Let market has for many years been dominated by securitised lenders with funds borrowed from the money markets and niche brands owned by the larger financials institutions. However, the global credit crunch has led to funding difficulties for the securitised lenders and limited funding for niche brands from their parent organisations. Many securitised mortgage lenders have as yet not been able to re-enter the marketplace as funding is sparse and too expensively priced. Meanwhile many niche brands are receiving smaller tranches of funding from their parent companies as a result of liquidity concerns.

New builds

New builds property – which many lenders also classify as properties, flats or houses built or converted in the last twelve months have been a particular cause of anxiety for Buy to Let lenders. It is increasingly common for lenders to refuse to lend on this type of property altogether. Capital Home Loans are the latest organisation to decline to lend on new builds including newly converted properties.

New builds is the one area of concern in the sector, particularly in some city centres where supply is currently outstripping demand. The fact that renovated flats and houses in the last twelve months are classed as a new build may be of surprise to many investors.

Please be aware it is still possible to fund new build Buy to Let property, but funding options are extremely limited. Almost all lenders will also be extremely suspicious of builders’ or developers’ discounts. Mortgage lenders have been paying particular attention to transactions where discounts are involved, and now scrutinise each transaction in order to gain a true market value.

Remortgaging new build property can also present problems because again the lender is trying to establish a true market value of property. Mortgage Express one of the UK’s largest Buy to Let lenders announced in February on new remortgage applications they will take the lower of either purchase price minus any discounts or open market value.

Loan to values

Some lenders are asking investors to put down larger deposits by lowering the maximum loan to value they will lend at. For example UCB Home Loans (the specialist Buy to Let lender of Nationwide) are asking borrowers to put down a 25% deposit, from the previous requirement for a 15% deposit. Meanwhile Irish Permanent has lessened their maximum loan to value to 80%, meaning there is a requirement for a 20% deposit. Mortgage Express (The UK’s largest Buy to Let lender according to Council of Mortgage Lender statistics) have also withdrawn their 90% loan to value Buy to Let range.

In the last five years Buy to Let lenders have lent at 85% loan to value, with many lending up to 90% loan to value last year. However some lenders are now introducing a maximum loan to value of 75% or 80%. The move is fairly widespread across the marketplace with some lenders making definitive moves to increase deposit requirements.

First time Buy to Let investors

First time Buy to Let investors are also likely to find their mortgage options decreasing. The Mortgage Works will no longer be lending to first time landlords, a stance also taken by UCB Home Loans. It remains to be seen if these changes will become the market ‘norm’ and if other lenders will follow suit.

Products available for a shorter time

Lenders are increasingly withdrawing products with little or no warning due to concern about lending beyond their available funds. Competitive products have a very short shelf life in the current market and we would urge investors to act fast to secure funding otherwise you’ll be disappointed.

The changes in Buy to Let mortgage criteria cannot solely be attributed to lender worries about the credit crunch and the need to ensure loans are as prime as possible. The credit crunch has meant fewer organisations are lending because securitised lenders are having difficulties securing funds at a rate competitive enough to re-enter the market. This means the lenders remaining are receiving a much higher number of applications and as result have been lending in elevated volumes. These measures may partly be being used as a short term mechanism to lessen the volume of applications lenders are receiving, allowing them to achieve smaller lending volumes they are more comfortable with. However many of the criteria are likely to remain and mortgage criteria are now aligned to the product offering we were seeing five years ago. The overriding considerations for Buy to Let lenders in the remainder of 2008 will be ‘quality’ and ‘low risk’ applications.

The key considerations for investors will be does your broker still have access to sufficient funding to satisfy your investment needs?

To discuss your Buy to Let mortgage needs in light of current market conditions please call 0845 345 6788

Buy to Let funding and the credit crunch – what it means for you

mortgagesforbusiness — Wed, 04 Jun 2008 13:19:23 +0000

The fourth quarter of 2007 has seen much speculation surrounding where the housing market and the Buy to Let sector are heading in 2008. Despite reports to the contrary the housing market has remained robust with a 2007 annual capital growth of approximately 6%, meanwhile Buy to Let lending grew to account for 12% of all new mortgages advances, compared to just 3% five years ago.

I’m sure we are all aware that lenders’ attitudes towards funding have become more cautious because of the situation in the US sub prime market causing the much publicised ‘credit crunch’. The availability of Buy to Let funding has lessened and criteria are becoming stricter to deny this fact would be foolish. However the situation isn’t as gloomy as it may seem. So what are the implications for you in early 2008?

Lenders are starting to focus distribution through their key partner relationships and are therefore not releasing products to the general market. Increasingly lenders will focus on the quality of the brokers and their clients with whom they transact, with lenders becoming risk adverse to brokers without a strong track record. Just because products are less widely available, it doesn’t mean there isn’t much from which to choose. Whereas we were ‘tracking’ some 700 products in our Bluesky sourcing system in September, there is still good coverage within the 490 products that we believe now deliver choice, competitive pricing and good service. We continue to offer our exclusive Keystone products that offer funding for Buy to Let properties above commercial premises. However even our leading product finance with some lenders is limited so we have introduced a booking fee system on these products to avoid speculative transaction lessening the funding pool available for clients.

Early 2008 is likely to see the cost of borrowing beginning to soften. December 2007 saw the first drop in Bank Base Rate in two years and it seems likely this downward trend will continue, as early as February. Lowering inflation, slowing manufacturing, steadying house price growth and a reduction in business confidence all point to further rate reductions in the first six months of the year. The Council of Mortgage Lenders believe variable rate mortgages will become increasingly popular in 2008 based on consumer expectations of further drops in interest rates, and this has been seen in new applications from the back end of 2007.

SWAP rates, the rate at which banks lend each other money and the basis of fixed rate mortgages have also begun to ease. In 2007 SWAP rates increased significantly due to concerns in global finance markets leading to fixed rate borrowing becoming more expensive. In early 2008 these rates have begun to reduce meaning if lenders reprice accordingly we could begin to see some cheaper fixed rates becoming available.

Tightening lending criteria is likely to see lenders placing ever greater scrutiny on the valuation process. We expect new builds in city centres to be viewed with some trepidation by lenders, and it is essential investors consider comparables in the area before accepting the developers’ valuation.

Securisation, the process many lenders use to source their mortgage funding, is also liable to change the make up of the lenders in the market. We are likely to see ‘on balance sheet’ based lenders (banks and building societies who use their own retail funds to provide mortgages) becoming more dominant. This is because ‘off balance’ sheet lenders who source finance from the money markets will find funds harder and potentially more expensive to secure. The change in the lender make up is again due to the ‘credit crunch’ and nervousness in the financial markets. This could mean in the coming year we offer you products from lenders you haven’t previously used or haven’t even heard their name. This shouldn’t concern you because we regularly meet lenders and review their lending practices and procedures to ensure our customers continue to receive the service to which they have become accustomed.

The key message for early 2008 is can your broker continue to offer the finance options you need in the current climate?

For further information on the leading Buy to Let mortgages we can offer please dial 0845 345 6788

Buy to Let investors look to the high street

mortgagesforbusiness — Wed, 04 Jun 2008 13:18:44 +0000

Mortgages for Business, the leading specialist Buy to Let mortgage broker, are reporting an increasing interest in Buy to Let flats above commercial premises. Mortgages for Business is currently the only UK broker to offer mortgages for this property type via their exclusive access to Keystone Mortgages.

“We launched the product in early 2007 and going into 2008 we have seen investors buying more and more of this property type.” Says, Jonathan Moore Head of Marketing.

Flats above commercial premises have in the past been viewed as undesirable to tenants. However in an increasing crowded rental market many renters are now exploiting their extremely spacious rooms and central locations.

Keystone Mortgages are one of the few mortgage lenders to fund this property type because many lenders have concerns around tenant attraction and factors such as smell above food outlets. This has lead to the flats of this type coming onto the market at comparably lower prices but with a similar potential rental value.

“Savvy investors are increasingly looking for higher yielding property types such as HMOs (houses in multiple occupancy) and flats above commercial premises as capital appreciation has steadied and rents have been increasing rapidly due to tenant demand. Additionally investors have more complex borrowing requirements such as using limited companies as an investment vehicle” Moore comments.

The Buy to Let market is increasing dominated by experienced portfolio investors and these investors are more comfortable with this property type, whereas newer investors will tend to be more wary.