Economy ‘should recover’ after rate cut

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 MORTGAGE MARKET SEES FURTHER CRITERIA CHANGES

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

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

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

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.

Posted by Jonathan Moore at 05:41 0 comments

Labels: buy to let, flats, residential

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

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

Mortgages for Business nominated for three What Mortgage magazine awards

Mortgages for Business, the leading specialist buy-to-let mortgage broker, has been nominated for three awards in the annual What Mortgage magazine award programme – the maximum number of possible nominations the firm could achieve.

Nominations in the ‘Best overall adviser’, ‘Best buy-to-let adviser’, and ‘Best specialist adviser’ have been made by mortgage lenders, chaired by the Editor of What Mortgage, Nia Williams, and the firm is hotly tipped to scoop the board.

The nominations are made on the following criteria:

• Comprehensive pre-purchase information – clarity on the adviser; the level of service it offers; its remuneration methods

• Clear information – easy-to-read documents regarding the recommendations

• Service excellence – ensuring the client understands what they are recommending; making sure that the client is happy with what the adviser is suggesting; pushing through the mortgage quickly and thoroughly so the client moves quickly; keeping the client informed all the way through the process

• Commitment to customer care – easily accessible staff (including evidence of how they ‘go that extra mile’) and extensive staff training

• Not trying to force additional products on clients if they don’t want/need them

Jonathan Moore, Head of Marketing at Mortgages for Business, said: “We are thrilled with the three nominations. It is testament that our industry colleagues believe us to be among the best of the best.”

The What Mortgage awards take place on 22 May at the Café Royal in central London.

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

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Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421