CREdiT
CRunCh
8000 less mortgage products of amateur landlords didn’t have much
than two years ago leeway if anything went wrong.
Darren Cook, at Moneyfacts, tracks the Some lenders – though not all – were
mortgage market and has detailed figures demanding that 125 per cent of the
on the numbers of products available. mortgage was covered by rental income.
There were 9549 mortgage products in the “That was a smart move,” Hagger says, “but
market on 31 July 2007, at the top of the lenders who did that were in the minority.”
boom, and that’s fallen to just 1267 now. More specialist lenders understood the
He believes the proliferation of products market – but some of the mainstream
during 2007 was due to the highly
Deposits are the
banks, he thinks, got into the market
competitive nature of the market. “It was without understanding it so well and have
such a free-for-all to get the business,” he
focus. People are
now withdrawn their products.
says, “lenders had to be innovative with Darren Cook has the numbers on this
their product ranges.” Now, lenders are less
saying, ‘I need to
market and they make sombre reading.
keen to take on new business, and many There were nearly 3500 buy-to-let
products have disappeared.
put down as much
products in July 2007; now there are only
However, he believes the market has 224, less than ten per cent of the previous
now stabilised; the number of products
as I can, rather than
total. Some providers, like Bradford &
hasn’t fallen for the last one-and-a-half Bingley and Northern Rock, have closed
months. “Lenders have had time to
I need to borrow as
their doors completely. “If you have an
streamline their product ranges,” he says, existing buy-to-let mortgage the products
so they may not need to do any further
much as I can.’
just aren’t available to remortgage.”
pruning. Besides, six rate cuts in a row Unlike residential mortgages, BTL
meant that lenders had to withdraw and mortgages are generally priced according
reprice products to maintain their margins. andrew hagger, moneynet to risk, so that the mortgage will revert to
Now interest rates appear to have settled at base rate plus a margin, rather than the
0.5 per cent, the banks can plan their standard variable rate. There may be
product ranges better. “That market’s gone.” unpleasant surprises for some borrowers.
There’s no doubt that mortgages are In the rest of the market, it looks as if Looking at the terms of the products
now a very profitable business for the there’s been a shift away from two-year available, there are no LTVs above 80 per
banks – which they probably weren’t at the fixes to longer term fixed rates. That goes cent, and only four fixed rate BTL
top of the boom. Andrew Hagger says that along with a move from some banks to cut mortgages available at that level. LTV of 75
on trackers, the margin that banks charge brokers out and focus on lending through per cent and below has become normal.
over base rates has increased to 2.5 to three the branch system. The Woolwich and So much for products; what is actually
per cent and can be as high as four. other lenders have been operating dual happening in the market? The Council of
Right now, he believes fixes are the best pricing, with mortgages for direct Mortgage Lenders’ figures show mortgage
option for homeowners. customers available at a better rate than approvals in March 2009 at 46,464. That’s
“You’ll be paying over the odds on what through brokers. Darren Cook says the below 61,578 in March 2008 and way
you’d pay on variable in the very short strategy “let them turn the taps on and off below the exceptional 133,194 in March
term, but in a year or two you’ll probably when it suited them with the branch 2007. But the decline is slowing from 54
be doing better,” he says. business” – but it also made brokers per cent to 25 per cent.
The fact that many fixes are at rates uncompetitive. That could be bad news for
significantly above SVR – and fixed term these banks in an upturn. If their branch commercial – little new lending
savings products too are available at well networks aren’t able to handle new Mortgages for residential property are
over three per cent – suggests that bank business, and they’ve frozen the brokers relatively easy to analyse. Commercial
treasuries are expecting rates to rise out, they could lose market share. property lending is rather different – as
significantly over the medium term. HSBC’s joint venture with broker John Darren Cook points out, “It’s difficult to
Charcol shows that at least one bank is track prices on the commercial side as a lot
sub-prime mortgages aware of the importance of maintaining its of it is negotiable.”
While increased availability of mortgages distribution chain – but not all banks are However, the story is similar to what
may be good news for most, those with an being that smart. we’ve seen on the residential side. Colliers
impaired credit history may not benefit. CRE says in its Property Snapshot for April
While the sub-prime sector isn’t buy to let – all but moribund 2009 that, “Property lending remains weak
completely dead, Darren Cook says that On the buy-to-let side the market is more with few banks lending,” and forecasts that,
there are only eight products now available restrictive. Andrew Hagger says, “The “the lending market will remain
in the market, and all of them charge eight number of products has dried up, the LTV unsupportive of new large debt-backed
to nine per cent interest – a big risk has really been tightened up and on the investment in property assets throughout
premium. “There were thousands of sub- whole it’s been hit harder than residential 2009 and into 2010.”
prime mortgages a couple of years ago”, he owner occupier.” He believes most lenders Pressure on loan to value ratios is
says, many of which have now reverted to see it as a more specialised area, and have increasing, with banks offering LTVs of just
LIBOR plus a margin (rather than SVR). been worried about the increasing number 40-45 per cent in many cases, and only
PROPERTYdrum JUNE 2009 13
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