News Review: Buy-to-let
Strong fundamentals buoy buy-to-let market by Charles
Haresnape, managing director, Aldermore Residential
the council of mortgage Lenders’ latest statistics show that the mortgage market remains at a low ebb. although remortgaging
was up 16% compared with February (driven by growing consumer expectations of interest rate rises) and the number of house purchase loans were also up 24% month on month, over a 12 month period the volume of house purchase activity was down by 17%. the general picture for the first quarter as a whole was of a subdued market and michael coogan, cmL director general, warned that the situation is unlikely to change for the foreseeable future. However, the buy-to-let
market is one of the few sectors which continues to buck the trend, with 27,600 loans being completed worth £2.9 billion during the first quarter of this year. although this is 3.5% lower than the previous quarter when 28,600 loans worth £3 billion were approved (which is a lot better than the 11% dip in the wider mortgage market), the sector has performed better than the first quarter of 2010, when just 22,000 loans worth £2.1 billion were written. this positive performance
has been fuelled by continuing
demand
for good quality rented accommodation and the cmL says it expects to see the growth in buy-to-let continue
to increase in the future. Little wonder then that brokers have seen a renewed interest in buy-to-let from a number of lenders, with norwich & Peterborough returning to the market to join established players such as aldermore, Paragon and the mortgage Works. other lenders have also sharpened their ranges, with new products and criteria being announced over the past few weeks. greater competition and, most importantly, an increased supply of funding, has to be welcomed as positive news for this important market. as other sectors of the mortgage market have continued to languish in the doldrums, so buy-to-let has become an increasingly important part of the market, for lenders and brokers alike. the total number of outstanding buy-to-let loans has increased from 1,305,000 at the end of 2010 to 1,313,200 at the end of march this year, with the value of outstanding loans also increasing from £151.5 billion to £152 billion. Buy-to-let now accounts for 12.3% of all outstanding loans by value and 11.6% of loans by number. and, from a lender’s perspective, an additional piece of good news is that the performance of buy-to- let loan books continues to be very good. For example, at the end of march, the three- month arrears rate on all uK buy-to-let loans stood at 1.62%, compared to 2.15% in the owner-occupied sector. although the repossession rate is higher on buy-to-let (0.13% compared to 0.07% for residential), this has
12 mortgage introducer JUNE 2011
more to do with lenders’ forbearance efforts on behalf of homeowners, than with a significant problem emerging in the buy-to-let sector. this is again good news for brokers, because it has encouraged more lenders to become active in the buy-to-let market and to offer increasingly competitive terms. the sixty-four million
dollar question is whether the buy-to-let sector appears buoyant at the moment simply because other sectors of the mortgage market are so dire, or will buy-to-let lending continue its upwards trajectory? the honest answer is that elements of both come into play, but there is no doubt that there are a number of important factors fuelling the growth of this market and there is no reason to believe these factors will be short- lived. For example, there is
evidence that the decline of the first-time buyer market is not simply a result of more stringent lending terms and a lack of funding, but is also due to a shift in the aspirations of young people today. Burdened with ever-increasing levels of student debt and also mindful of the need to maintain job mobility, graduates are happy to rent rather than buy and consequently the age of first- time buyers is going up. the need for good quality rented property is increasing and will do for many years to come. at the same time, property remains a good long-term prospect for many investors, who have seen savings rates fall to an all time low and recent world events make the
stock market uncomfortably volatile. although property prices may not rise on a national basis for another couple of years, the long- term expectation is that it’s a case of when and not if and, in the short-term, the yields available on buy-to-let property are still attractive. What’s more, most professional landlords have not turned away from the market. the majority have held on to their property portfolios and are happy to take a long- term view of the market. there is also good evidence that many are continuing to invest in property and take advantage of weaker house prices in order to add to their portfolios. in summary, therefore, buy-to-let is a well- entrenched and permanent part of the uK housing and mortgage markets. at a time when brokers have
seen their bread and butter remortgage and purchase business take a big hit, growth markets such as buy-to-let have become increasingly important. What’s more, it’s a sector where the input of professional and knowledgeable brokers is highly valued. intermediaries can add real value for their clients. against a backdrop of a moribund mortgage market, it’s good to know there is one sector that has retained its vigour. However, lenders need to remain mindful of the need to think innovatively if first-time buyers are to have a chance of eventually getting a foot on the first rung of the housing ladder; the buy-to-let market cannot be expected to take all the strain.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60