Buy to Let Mortgage Rates

Landlords ‘concerned’ about buy to let mortgage rates

Landlords who are considering entering the London buy to let property market might be concerned by the rise in specialist mortgage rates.

According to a survey by the National Landlords Association, 89 per cent of landlords would be negatively impacted by a rise of two per cent in interest rates, while 80 per cent might have to reconsider their future as a landlord.

Follow the link for more buy to let mortgage rates

Buy-to-let Lending May Improve Following Higher Banking Profits

The RlA News Service reports that some of Britain’s largest buy-to-let lenders are experiencing a return to profits and observers believe that this may help increase lending to private sector landlords. Bradford & Bingley posted profits amounting to £896 million during the first six months of the year.

Although this figure represents pre-tax profits, it is still a major improvement for Bradford & Bingley over their performance during the same period in 2009. Last year, the buy-to-let leader experienced a loss of £160 million. But an increase in profits is not the only good news for the government-administered financial institution. The number of clients in arrears, including both regular mortgage holders and buy-to-let investors, dropped over the first two quarters. In fact, the number of clients with arrears extending to three months declined by 18%, compared to the early summer of 2009.

Some observers expect that the return to profits and lower arrears will ultimately lead to more varied buy-to-let products, as well as an upsurge in lending. But Bradford & Bingley also has other financial priorities as a nationalized institution. First, it intends to begin repaying its debts as soon as possible, but it would also like to ensure that taxpayer money is spent in a responsible manner. Media reports also suggest that the organization may soon merge with Northern Rock, another formerly private bank nationalized by the previous government, following the start of the financial crisis.

Better lending conditions are crucial to the recovery and expansion of the buy-to-let sector, as many landlords looking to add to their portfolios, as well as newcomers to the market, saw their plans nixed due to the lack of lending.

London Residential Landlords See Rents Rise

London-area landlords experienced the highest rental increases and almost doubled the national average according to the RLA. Rents in the capital rose by 1.9%, bringing average monthly rates to £942. But the positive news was not only relegated to London, as landlords in areas hardest hit by the economic crisis also experienced noticeable increases in rent. Rates rose by 1.4 in England’s North West, while rates increased by 1.3% in the North East. The West Midlands, however, did not experience the same positive trend seen elsewhere in the UK. Buy-to-let landlords actually saw their rates drop by 1.7% in June.

Proposed Mortgage Caps May Impact Buy-to-Let Sector

The Bank of England is considering proposals to place a limit on how much homebuyers can borrow, in order to finance the purchase of their house, reports the RLA. According to one possible scenario currently under examination, this amount would not exceed 75%, which means that buyers would be required to deposit at least 25% of the residential property’s total.

The goal behind restricting the loan-to-value ratio in the case of private mortgages is to ensure that some of the main factors that led to the financial crisis in late 2008 are no longer present to wreck havoc in the future. The Bank of England also hopes that such a measure would ensure stability in the lending sector.

If officials do proceed with a cap on maximum loan amounts, residential landlords may be indirectly impacted. Some observers believe that demand for residential rental properties may increase, as a larger number of Britons find themselves unable to purchase their first home. Others, however, argue that fewer potential buyers for homes may negatively impact property prices throughout the UK.

Another potential argument against enacting a cap on mortgage lending is the fact that most banks are much more cautious and weary of reckless loans than before. This has resulted in a marked decline in loan-to-value ratios. In fact, recent statistics confirm that most loans require larger deposits than ever before, even without the Bank of England’s proposed regulation. During the first three months of the year, 98% of all approved mortgages required deposits of at least 10% or more.

Buy to Let; Red Tape and Regulation Cut

Prime Minister David Cameron’s Conservative-Liberal Democrat coalition decided to avoid the introduction of more regulation and red tape in the buy-to-let sector. Grant Shapps, the new housing minister, told the House of Commons that there was no compelling need to regulate private residential landlords any further, as a clear majority of the 3 million English residents who live in rental accommodation seem satisfied with their lodging. Shapps pointed out that the government’s role is to ensure that there is a healthy balance between the rights and obligations of residential landlords. At this point, the minister sees no reason to tinker with this balance.

The previous Labour government drafted plans to introduce a new set of red tape and regulations to govern residential landlords. These included requiring landlords to join a national register program, mandating everyone in the buy-to-let sector to draft written agreements with tenants and the introduction of a new set of rules that would have governed letting agents. Shapps spoke directly to landlords, promising not to increase bureaucratic red tape, while also calling on local councils to make effective use of the authority that they already have to deal with a small minority of landlords who provide substandard service.

While the decision not to further regulate the buy-to-let sector may serve as a relief to landlords, some are still concerned that there is too little oversight when it comes to letting agents. The alternative, which was not chosen by the government, would be to launch a set of national standards and rules to ensure the professionalism and ethical conduct of all letting agents.

Residential property values may decline due to supply

Some buy-to-let and real estate specialists believe that Britain’s residential property sector may be headed towards a slow down later this summer and in the fall, after figures published by Halifax suggest that the housing sales market started cooling this past May. Halifax’s most recent statistics estimate that residential property prices declined by 0.4% in May and data released by other key players in the real estate sector appear to bolster these figures. While Nationwide did not detect a clear decline in prices last month, the organization found that growth has slowed significantly, and now stands at just 0.5%. This represents a negative change from April, when property prices increased by 1.1%. According to an analysis in the London Times, some observers fear that a so-called “double dip” may slow down recovery in both the property sales sector, as well as in the residential buy-to-let market.

Despite the decline in residential property values, prices are still 9.8% higher than they were 12 months ago. This does, however, represent a drop, considering that the rate of annual increase stood at 10.5% at the end of April. Capital Economics’ Ed Stansfield told The Times that price inflation may have peaked in April. The two factors that are responsible for a decline in price inflation is the fact that the shortage in the supply of properties is no longer as acute, as well as continued concerns about the state of the economy. Predictions for the remainder of the year vary, but Jones Lang LaSalle estimates that London area flats prices are likely to be stable this year, while residential property prices nationwide will decline by 1%.

Rental Rates Increase in May

Britain’s residential buy-to-let sector sector experienced another increase in rents, according to figures released by the Royal Institute of Chartered Surveyors (RICS). Approximately 30% of agents who work with landlords saw the rents collected for their clients rise over the last four weeks. RICS suggested that the tight supply in available properties may have played a decisive role in the current rise in rental rates. Jeremy Leaf, RICS’s spokesman, added that a growing willingess among banks and lenders to offer landlords buy-to-let loans may also have helped the sector expand, by attracting new investors.

A number of buy-to-let specialists believe that the current climate makes continued rental increases likely. For example, Tom Entwistle of LandlordZone observed that demand for rental properties remains strong, in part due to the fact that many first-time buyers are still unable to purchase their first home due to the unavailability of affordable mortgages. Entwistle noted that an additional factor was the continued uncertainty in the job market, which means that many Britons value the flexibility offered by renting, rather than being tied down to a house in a specific city or neighbourhood.

CML Encourage Higher Investment in Private Rental Sector

Data published today by the CML shows that buy-to-let activity in the first three months of this year settled back to former levels, following a modest upturn in house purchase by investors at the end of last year triggered by the stamp duty holiday. As a result, the number of buy-to-let loans declined by 15% to 22,000 in the first three months of 2010. Over the same period, the value of lending also declined, by 12% to £2.1 billion.

Leaving aside the impact of the stamp duty holiday, however, buy-to-let lending has now remained broadly flat over each of the last five quarters. Compared to the first quarter of 2009, the value of buy-to-let lending in the first three months of this year is unchanged, while the number of loans declined by just 2%.

Low interest rates are continuing to contribute to a modest improvement in buy-to-let arrears. At the end of March, the number of loans with arrears of more than 1.5% of the mortgage balance totalled 19,300 (1.56% of all buy-to-loans), compared with 20,700 (1.69% of loans) at the end of 2009, and 28,800 (2.47% of loans) a year ago. The number of buy-to-let properties taken into possession in the first quarter of 2010 totalled 1,400, an increase from 1,200 taken into possession in the preceding three months but unchanged from the total a year ago. Meanwhile, cases where a receiver of rent had been appointed totalled 11,200 at the end of March, down from 11,900 three months earlier but up from 9,200 a year ago. These cases are similar in many ways to a lender taking possession of a mortgaged property, with the landlord being removed and the receiver collecting rent and passing it on to the lender to apply to mortgage payments.

Commenting on the figures, the CML’s director general Michael Coogan said:

“Ignoring the effect of the stamp duty holiday, the lending figures show that the buy-to-let market has settled into a period of stable, low-volume activity. Generally, prospects for the rental market are good. But uncertainty over house prices, interest rates and the availability of mortgage funding is continuing to hold back the buy-to-let market at this stage.

“We also want to see how the new coalition government takes forward the Treasury’s initiative to encourage higher investment in the private rented sector, bearing in mind the scope for growth that exists to meet future demand from tenants. There is a case for targeted measures in the Budget, even though the primary focus will be the fiscal deficit.”

Follow the London Property News at Paramount Magazine. Paramount Magazine provides essential reading for anyone involved or considering buying, selling, renting or letting a commercial or residential property in London.

Buy to Let Lending Remains Steady

Data published today by the CML shows that buy-to-let activity in the first three months of this year settled back to former levels, following a modest upturn in house purchase by investors at the end of last year triggered by the stamp duty holiday. As a result, the number of buy-to-let loans declined by 15% to 22,000 in the first three months of 2010. Over the same period, the value of lending also declined, by 12% to £2.1 billion.

Leaving aside the impact of the stamp duty holiday, however, buy-to-let lending has now remained broadly flat over each of the last five quarters. Compared to the first quarter of 2009, the value of buy-to-let lending in the first three months of this year is unchanged, while the number of loans declined by just 2%.

Low interest rates are continuing to contribute to a modest improvement in buy-to-let arrears. At the end of March, the number of loans with arrears of more than 1.5% of the mortgage balance totalled 19,300 (1.56% of all buy-to-loans), compared with 20,700 (1.69% of loans) at the end of 2009, and 28,800 (2.47% of loans) a year ago. The number of buy-to-let properties taken into possession in the first quarter of 2010 totalled 1,400, an increase from 1,200 taken into possession in the preceding three months but unchanged from the total a year ago. Meanwhile, cases where a receiver of rent had been appointed totalled 11,200 at the end of March, down from 11,900 three months earlier but up from 9,200 a year ago. These cases are similar in many ways to a lender taking possession of a mortgaged property, with the landlord being removed and the receiver collecting rent and passing it on to the lender to apply to mortgage payments.

Commenting on the figures, the CML’s director general Michael Coogan said:

“Ignoring the effect of the stamp duty holiday, the lending figures show that the buy-to-let market has settled into a period of stable, low-volume activity. Generally, prospects for the rental market are good. But uncertainty over house prices, interest rates and the availability of mortgage funding is continuing to hold back the buy-to-let market at this stage.

“We also want to see how the new coalition government takes forward the Treasury’s initiative to encourage higher investment in the private rented sector, bearing in mind the scope for growth that exists to meet future demand from tenants. There is a case for targeted measures in the Budget, even though the primary focus will be the fiscal deficit.”

Buy to Let Lending Increases but Still Way Down on Previous Years

New buy to let lending increased for the second consecutive quarter in the last three months of 2009, according to figures released from the Council of Mortgage Lenders (CML).

There were 25,800 new loans advanced in quarter four, up from 23,700 in the third quarter but down from 38,000 in the fourth quarter of 2008. The 2009 growth is from a very low base after a consistent decline through seven consecutive quarters.

Gross advances totalled £2.4 billion in the fourth quarter of last year, up £300 million from the third quarter but down £1.6 billion from the fourth quarter of 2008.

Volumes remain comparatively low, both in absolute terms and as a percentage of overall lending.

For 2009 as a whole, there were 93,500 buy to- let loans advanced. This is 58 percent down on the number advanced in 2008 (222,700) and is the lowest annual volume since 2001.

All types of buy to let lending increased in the last three months of 2009. As with the mainstream mortgage market though, loans for house purchase continued to be advanced at about twice the rate of loans for remortgage with 62 percent of new buy to let loans being for house purchase.

For 2009 as a whole, 60 percent of buy to let lending was for house purchase, compared to just 46 percent in 2008, demonstrating an ongoing demand to increase residential investment portfolios if finance is available
The number of landlords with arrears of more than 1.5 percent of the balance stayed the same in the fourth quarter at 20,700, but is 37 percent down from the 32,900 seen in the same period the year before.

The number of buy-to-let properties taken into possession in the fourth quarter fell by 25 percent from quarter three but rose 9 percent from quarter four 2008.

Commenting on this latest buy to let data, the CML’s director general Michael Coogan said: “We are concerned that future, wrongly directed, regulation may actually prevent buy to let playing its vital role in providing good quality homes and wider housing choices for people who cannot afford home ownership or do not qualify for social housing.”