News Review: Buy-to-let
Spending review turns up heat on private rental sector
by Steve Olejnik, head of sales, Mortgages for Business
november proved a strong month for the buy-to-let sector kicking off with Bm Solutions’ “fire sale” of two competitively-priced prod- ucts for one week only. it had the desired effect, as they re- ceived more than £100 mil- lion of applications each day over the five day period. no doubt there will be
some cases that fail the un- derwriting tests but it still represents a significant in- flow and it is encouraging that this level of business ex- ists. on the middle ground,
coventry godiva’s decision to withdraw its popular buy- to-let range, increase rates by around 0.5% and re-intro- duce £800 arrangement fees was a little disappointing. But despite these changes, its two new products still fare well based on their two-year costs
which offer 4.75% for track- ers and 4.85% fixed. coventry godiva has also retained the free valuation (to £680) and free legals for remortgages.
Innovation Precise mortgages continues to innovate and brings much needed competition to the market enhancing criteria so that property investors can now have up to 20 buy- to-let properties with other lenders, (increased from four properties). in addition it has reduced borrowers’ income requirements from £35K down to £25K and intro- duced some new products at 75% loan to value including two-year discounted rates at 4.89% and a full-term tracker at 4.99%. aldermore mortgages also
continues to support the market with some equally strong products at 75% LtV. However, rumours doing
the rounds that Platform was also gearing up for a signifi- cant increase in buy-to-let business were dashed when it was announced that it was
There is also encouraging news in the wider buy-to-let market. According to the Association of Residential Lettings Agents the number of tenants looking to rent has climbed to an eight-year high and levels of demand are now more than double the figures seen in 2007 at the peak of the market. Research from Countrywide concurs with this data reporting that more than 61,000 new tenants registered for rental accommodation in quarter three – a 19% rise on quarter two, meaning there were 5.8 tenants on average vying for each rental property. Good news indeed for landlords who can expect a decrease in void periods.
This boon for landlords was reinforced by 8 mortgage introducer DECEMBER 2010
no longer accepting profes- sional property developers and landlords. other chang- es to its criteria included the limitation of buy-to-let properties held with all lend- ers to five and no let-to-buys. Having said this, Platform is keen to support the non-pro- fessional landlord and watch this space for increased ap- petite in 2011. elsewhere, the mortgage
Works continues to provide close to 40% of market buy- to-let products and abbey for intermediaries has con- firmed that it plans to re- launch itself back into the buy-to-let arena next year.
Numbers up all this jockeying for position among lenders has resulted in an increase in the number of buy-to-let products. moneyfacts reported 292
BtL products on 15 octo- ber up from 266 in July 2010. this reflects our own figures on mortgage Flow, our online buy-to-let sourcing system, which showed 244 products on 23 november from de-
Paragon Group’s private rented sector trends report which revealed that a total of 36% of landlords saw rents rising. A similar trend was reported by LSL Property Services which said that UK rents are now 3.1% higher than in September 2009 following eight consecutive months of rises.
As one might expect this activity has lead to an increase in demand for buy-to- let investments from property investors and professional landlords, many of whom have been looking to remortgage to release capital for further purchases. The Bank of England’s latest Trends in Lending report revealed that this sector had increased slightly for the first time since the third quarter of 2008.
monstrably active lenders with the average fixed rate standing at 5.32% and the av- erage variable at 4.64%.
Looking forward Looking forward, it is wide- ly predicted that the Bank of england base rate will hold fast for some time. We feel that nearing two years is realistic. the nationwide forecasts that net buy-to-let lending in 2011 will increase to £11 billion (up from £9 billion this year), as barriers to home-ownership, a grow- ing population and a lack of social housing continue to load pressure on an already burgeoning private rented sector. going into 2011, it is like-
ly that 80% of the vanilla buy-to-let market will be dominated by the mortgage Works and Bm Solutions, with the likes of coventry, Precise mortgages, Platform, aldermore mortgages and possibly abbey plugging the remaining gap. more com- plex buy-to-let investment scenarios will surely con- tinue to rely on Paragon and aldermore commercial. Sourcing buy-to-let fi-
nance should prove good business for intermediar- ies and lenders will have to shift funds from the stilted residential sector to help service demand. more is still needed though to ease the flow of credit and it is im- perative that the not just the banks but the government supports the private rented sector in its efforts to fill the ever increasing shortage of suitable properties.
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