News Review: Buy-to-let


Mortgage funding remains the fly in the ointment for buy-to-let


by


Alan Cleary, managing director, Precise


Mortgages


the buy-to-let market has been in intensive care for the best part of three years and has had to be resuscitated on a number of occasions, but is it time to move the patient out of the icu onto the recovery ward or is there still a bout of mrSa to come? the feared capital gains


tax increase in last month’s emergency Budget appeared to be more modest than an- ticipated and whilst clearly the rise from 18% to 28% will have an effect on the market it is likely the impact will be far less serious than some headlines would have had you believe. the Building and Social


“It should be taken as good news that some lenders have managed to source new money and are now actively lending”


Housing Federation predicts that one in five people will be privately renting by the end of the decade. this number seems highly plausible espe- cially if interest-only mort- gages are to be scrapped, first-time buyers struggle to get on the property ladder, public sector unemployment rises and the amount of young professionals migrating to the


Recent weeks have seen new lenders in the buy-to-let space and, dare I say it, even some competition. But is this a sign of good things to come or is it a temporary blip?


The mortgage market is a massive £220bn


smaller than it was in 2007 - that is an astonishing 60% reduction and the number of mortgage brokers has shrunk broadly in line with this figure, falling from a high of c30,000 to around 12,000 today.


Whilst this has obviously been very painful for many mortgage brokers, the worst is now likely to be over and those who still remain active will have significant opportunity as and when the market starts growing towards a more sustainable position.


The buy-to-let market has suffered an even


greater decline with gross lending down an eye watering 80%. The market is in dire need of new lenders and those that focus on the intermediary


8 mortgage introducer AUGUST 2010


city increases. this is likely at some point to translate into an increase in rental yields and will make investment in property significantly more attractive to the more patient investor. in fact, a number of surveys and indices are already showing signs that rents are firming up, for ex- ample LSL Property Services whose buy-to-let index shows that rents have risen for five months on the trot and that they are up 3.2% on a year ago, June alone showed an increase of 1% as more people conclude that renting is a bet- ter option than buying. the fly in the ointment


at the moment is mortgage funding which remains a very difficult challenge for most if not all lenders. it should be taken as good news that some lenders have managed to source new money and are now actively lending.


sector should be embraced as we are all acutely aware that there are lenders out there who would be pleased to see an even smaller intermediary sector and it is highly likely that the future new entrants such as Tesco and Virgin will have little need for intermediaries. Both Precise Mortgages and Aldermore’s entrance should therefore be seen as positive, with both providing additional access to finance for landlords and a wider range of products to choose from. A report from the Council of Mortgage Lenders


recently expressed concerns over the future amount of gross lending available and our internal view is that gross lending in 2010 will be flat at best. Remember, gross lending is directly linked to the amount of proc fee income generated and a falling gross lending number inevitably leads to fewer brokers and this, if allowed to continue, would have a very negative effect on borrower choice.


Buy-to-let market is in better shape than


12 months ago The Mortgage Works and BM Solutions continue to dominate the market which is no bad thing as one can only imagine the carnage that would have been caused if these two lenders had also been forced to withdraw. TMW’s move to 80% LTV


is very likely to bring new landlords into the market and is one of the first signs of product innovation for quite a while. This is a bold move and it is very likely that it will have been made on the back of some confidence in the buy-to-let space.


The coalition government has taken some decisive action in creating a plan to clear our national debt. This will make it less likely that we as a country will get downgraded by the rating agencies which in turn will keep the cost of our borrowing under control. This should help the Bank of England keep interest rates low whilst we work our way through some of the other macroeconomic issues such as


unemployment and inflation levels.


Whilst it is difficult to say that everything is going to be all right, it is clear that the buy-to-let market is in better shape than it was 12 months ago.


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