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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
own personal copy sent
He believes the proliferation of products market – but some of the mainstream
during 2007 was due to the highly
competitive nature of the market. “It was Deposits are the
banks, he thinks, got into the market
without understanding it so well and have
such a free-for-all to get the business,” he
says, “lenders had to be innovative with focus. People are
now withdrawn their products.
Darren Cook has the numbers on this
their product ranges.” Now, lenders are less
keen to take on new business, and many saying, ‘I need to
market and they make sombre reading.
There were nearly 3500 buy-to-let
products have disappeared.
However, he believes the market has put down as much
products in July 2007; now there are only
224, less than ten per cent of the previous
now stabilised; the number of products
hasn’t fallen for the last one-and-a-half as I can, rather than
total. Some providers, like Bradford &
Bingley and Northern Rock, have closed direct to you
months. “Lenders have had time to
streamline their product ranges,” he says, I need to borrow as
their doors completely. “If you have an
existing buy-to-let mortgage the products
so they may not need to do any further
Property finance
pruning. Besides, six rate cuts in a row much as I can.’
just aren’t available to remortgage.”
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
C a r r y o n c r u n c h i n g
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
Andrea Kirkby monitors the money supply market 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
ne of the major constraints products including one from the Halifax Right now, he believes fixes are the best pricing, with mortgages for direct Mortgage Lenders’ figures show mortgage Delivered to your door
O
in the property sector right which offers to pay council tax for half a option for homeowners. customers available at a better rate than approvals in March 2009 at 46,464. That’s
now is that of securing year for first time buyers, and a fee-free “You’ll be paying over the odds on what through brokers. Darren Cook says the below 61,578 in March 2008 and way
finance. Lower mortgage offer from Alliance & Leicester. 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
approvals, tighter lending However, loan to value ratios are still 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
criteria, and banks’ risk restrictive. Hagger says, “Unless you’ve got be doing better,” he says. business” – but it also made brokers per cent to 25 per cent.
aversion, have all made it more difficult to a big deposit to put down you’re still paying The fact that many fixes are at rates uncompetitive. That could be bad news for
secure funds for property investment a big premium on the interest rate.” While significantly above SVR – and fixed term these banks in an upturn. If their branch commercial – little new lending
across the spectrum from home ownership in the boom, the income multiple was the savings products too are available at well networks aren’t able to handle new Mortgages for residential property are
to development finance. main focus, it’s now the size of the deposit over three per cent – suggests that bank business, and they’ve frozen the brokers relatively easy to analyse. Commercial
In the past couple of months, though, There were nearly which is the main focus of both banks and treasuries are expecting rates to rise out, they could lose market share. property lending is rather different – as
there’s been some evidence that the buyers. “People are saying I need to put significantly over the medium term. HSBC’s joint venture with broker John Darren Cook points out, “It’s difficult to free of charge, the fi rst
markets are thawing and finance has 3500 buy-to-let down as much as I can, rather than I need Charcol shows that at least one bank is track prices on the commercial side as a lot
become easier to find. Are we all kidding to borrow as much as I can,” he says. sub-prime mortgages aware of the importance of maintaining its of it is negotiable.”
ourselves? I rang a number of industry products in Lending criteria appear to be loosening a While increased availability of mortgages distribution chain – but not all banks are However, the story is similar to what
experts to find out. little, with more mortgages available for may be good news for most, those with an being that smart. we’ve seen on the residential side. Colliers
In the residential mortgage market, it July 2007, now higher LTVs. Pricing for 80-85 per cent impaired credit history may not benefit. CRE says in its Property Snapshot for April
looks as if we may be past the worst, While the sub-prime sector isn’t buy to let – all but moribund 2009 that, “Property lending remains weak
according to Andrew Hagger, a spokesman there are 224.’
LTV mortgages is also now getting more
competitive, though buyers without a large completely dead, Darren Cook says that On the buy-to-let side the market is more with few banks lending,” and forecasts that,
for the price comparison website deposit will still pay a premium. there are only eight products now available restrictive. Andrew Hagger says, “The “the lending market will remain
MoneyNet. He says, “Mortgage providers Darren Cook, M o n e y f a Cts Hagger doesn’t believe we’re likely to see in the market, and all of them charge eight number of products has dried up, the LTV unsupportive of new large debt-backed
are beginning to show a bit more appetite,” 100 per cent mortgages return. If they do, to nine per cent interest – a big risk has really been tightened up and on the investment in property assets throughout
since negative equity is less of a concern he thinks they will probably be specialist premium. “There were thousands of sub- whole it’s been hit harder than residential 2009 and into 2010.” Monday of every month
now that the house price decline appears products, most likely on longer term fixed prime mortgages a couple of years ago”, he owner occupier.” He believes most lenders Pressure on loan to value ratios is
to be slowing. He’s also seen a lot more rates with much stricter criteria and tight says, many of which have now reverted to see it as a more specialised area, and have increasing, with banks offering LTVs of just
advertising in recent weeks, with promoted customer targeting. LIBOR plus a margin (rather than SVR). been worried about the increasing number 40-45 per cent in many cases, and only
1 2 J U N E 2 0 0 9 PROPERT Yd r u m PROPERTYd r u m J U N E 2 0 0 9 1 3
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the agency is seeing a better flow of increased prices, despite a desire by owners
L i g h t
applicants registering and viewing, agreed to push the limits. Any rush to try and
at the
sales are still low when measured against ‘force’ prices, up by agents trying to win
the number of viewings. “March and April business by overvaluing, or sellers simply
have been the busiest months since being too ambitious in their expectations,
September 2007 but the number of could stall the fragile improvements we are
properties coming on the market is low for seeing. I think in time, we will look back on
end of the tunnel?
this time of year which is increasing the this part of 2009 as the point, where the fall
number of viewers per property.” So it in values started to bottom out and the
stands to reason then that agents are seeing road to better prices and activity began.”
multiple offers on the well-priced So the question remains, how long will to all content on
properties that do exist. the ‘bottoming out’ take and how many
Agents are reporting multiple “Well-priced properties are even going months – or years – is recovery likely to
above asking price” says Peter Rollings, take? Managing Director of Winkworth
offers and properties selling within “because it was the ‘right one’ (for the Franchising, Dominic Agace is upbeat.
buyer). In fact we’ve had 35 ‘best and final’ “We are seeing an improved market
days but is the market really March and April offers this year. Our ‘fall through’ rate has place; low interest rates and quantitative
shrunk dramatically.” Similarly, Robert easing appear to be feeding through and…
recovering? By Danielle Simpson have been the Scott-Lee has reported significant activity buyers are buying again. However, macro
at Chancellors and comments, “With economic conditions such as deteriorating
busiest months since increased access to funds, good investment employment levels and ongoing bank write
fter a daily diet of depressing expects house prices to fall another eight Mark Graves, Managing Director of returns and people not able to wait any downs cannot be ignored. The property www.propertydrum.com
A
headlines, falling house per cent from here but rise six per cent Linear Financial Services, comments, “The September 2007 longer to purchase, we are finding a market cannot operate in isolation for a
prices, redundancies and during 2010 and 2011. only way lending can be maintained at the significant increase in the number of sustained period. Therefore, whilst we will
repossessions its little However, in order to drive any sort of current level is if cash purchasers continue but the number of multiple offers and properties going for see an improvement in 2009, we will not
wonder we’re searching for recovery in the housing market consensus to swallow up competitively priced over the asking price.” see the start of a full recovery and property
green shoots and itching to among economists and lenders is clear; the properties because, although we are properties coming Andrew Dewar, however, considers the price growth until these macro elements of
call the bottom of the market. Yes, the banking crisis has to end first. encouraged by the number of first time market has some way to go yet before we the economy improve. We anticipate a
number of home purchases rose to 39,000 buyers who want to enter the market, there on the market is low can expect to see sales of properties where sustained recovery leading to price growth,
in March but it only sounds good until you are simply not the products available for asking prices are high. “Growth in values which will only start in 2010, although we
compare it with the crash of the 1990s those without large deposits”. for this time of year.’ will inevitably come but it will be envisage transactional levels will improve
where monthly mortgage approvals stayed According to the Council of Mortgage measured. The renewed activity we are 10-15 per cent this year.”
above 60,000. Then there’s the ‘good news’ Lenders, there were 34,800 FTBs in August Andrew dewAr , CurChods estAte AgenCy seeing is fragile and will not yet cope with Indeed, Chief Economist at Nationwide, – news, features, legal
from Nationwide that house prices fell by ’07 compared with 8,800 in January ’09 and
just 0.4 per cent in April, but for the same just 9,400 this February.
month Halifax reported a decline of 1.7 per “Many first-time buyers are unable to ‘window dressing’ remains to be seen”.
Anecdotal evidence from West London
cent. There’s activity from cash buyers, but secure a mortgage without the support of Indeed Nationwide has recently
this needs to continue to spell significant their parents,” continues Mark. “With announced that the demand for secured
recovery, and as first time buyers hold fire lenders predicting the market will fall lending is expected to fall further and
lenders are up against rising another 10 per cent, buyers with a 90 per Merryn Somerset Webb, Editor at Money
unemployment as GDP is contracting fast. cent mortgage would be in negative equity. W e e k , appeared on prime time television
It’s a sobering picture to say the least. Furthermore, home-owners coming off the this week, to advise home-searchers that
According to Peter Rollings of Marsh back of fixed rate deals are securing the market hasn’t bottomed out. “I think
and Parsons, the market in London is at or variable rate deals at around three per cent, prices are going to fall further over the next updates, documents,
JUNE 2 as close to the bottom as makes no but if they moved house, that rate would couple of years so if you do have a deposit
0 difference in a medium to long-term increase to six per cent or 6.5 per cent so if and want to buy but can afford to wait, you
w
09
w
£
w.
4 investment. “People either want to get on People either want they don’t need to move, they won’t. If probably should.” So unless FTBs are so
p
.9
ro
5
per
t
with their lives once more and move, or are anything, the market will be quieter in the strapped for cash they’ve sold the TV,
ydr
um
.
seeing the market as an excellent to get on with their second half of this year.” they’re not likely to enter the market soon.
com investment opportunity,” says Peter. “Over It is clear that the cost of bringing a 90 While activity levels in the housing
90 per cent of our sales in London’s central lives once more and per cent mortgage to the table far exceeds market are rising, house prices in April
region have been to cash buyers and now that of a 60 per cent mortgage loan to value were 17.7 per cent lower on an annual
that the mortgage market is loosening up I move, or are seeing mortgage so it is little wonder that all the basis and the house price to average
would expect the market to get busier lenders are competing in the same market earnings ratio has declined by 27 per cent
during the year with prices probably the market as an space. Mark explains, “Until lenders find a to its lowest level since September 2002, product and service
bumping along the bottom for the rest of way to make money out of high loan-to- according to the Halifax, housing
2009, then starting to pick up in the first excellent investment value lending we are not going to see any economist, Martin Ellis points out, “The
quarter of 2010. The chronic shortage of real recovery in the market for a while. house price to earnings ratio is a key
stock might mean a quicker recovery but opportunity.’ Government-owned lenders are under measure of housing affordability.” edwardes square w8
don’t hold your breath!” Indeed, the Centre huge pressure to provide products for first Andrew Dewar, Senior Partner of This Georgian house was marketed in early April at £3,500,000. It had 58 viewings in 10
for Economics and Business Research PETER ROLLINGS, MARSH AND PARSONS time buyers, but how much of this is just Curchods Estate Agency, admits although days and sold just below the asking price, the buyer exchanging contracts in five days!
3 2 J U N E 2 0 0 9 PROPERTYd r u m PROPERTYd r u m J U N E 2 0 0 9 33
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