News Review: Property
Buy-to-let pricing is still too high for the risk by
Nigel Stockton, financial services director,
Countrywide
recently i’ve made a few comments about the need for larger lenders to enter the buy-to-let sector and whilst that hasn’t happened, at least the relaxation and proliferation of smaller lender products continues. Latest is the cambridge which announced that it has now doubled the maximum loan size to £500,000 on one of its 2-year fix products; as tesco would have it, every little helps! defaqto has found
that average rates and arrangement fees have fallen for 75% loan to value products. it is interesting looking at the difference in prime versus buy-to-let. defaqto quotes the average rate for a regular 2-year fixed rate product as 3.52% for prime with an average arrangement fee of
£844; the average buy-to-let rate is 4.86% with a £2,603 fee, so buy-to-let is priced for risk. i think the lenders should now evidence that risk. How much worse are impaired loans in their buy- to-let books versus prime? as the largest letting agent
in the uK, we generally could do with more stock. Lots of investors would love to get a look in - it just still doesn’t feel like there is enough competition in this area. How do we know that lenders are not overcharging in the buy- to-let market? the lettings market is
buoyant. Paragon reported for Q3, buy-to-let accounted for the highest proportion of brokers’ business since they began recording the data in 2007. the association of residential Letting agents recently announced that the private rental sector is close to capacity and our agents claim that demand is far exceeding supply of properties for rent. So we’ve got lenders maximising
Too many curve balls to
predict future Unfortunately, the doom and gloom highlighted by our CEO Grenville Turner in last month’s column has been exacerbated by a flurry of reports over the last fortnight. First we had the Office for National Statistics’ report that unemployment had reached a 17-year high, with the unemployment rate in the UK now at 8.1%. Then we heard that inflation has increased by both measures – the CPI now stands at 5.2%, whilst RPI is at a 20-year high – up to 5.6%. This can’t help lending can it?
In advance of most other housing market
forecasts, Capital Economics provided its usual negative outlook earlier this month by announcing that they expect GDP growth to hit zero next
6 mortgage introducer NOVEMBER 2011
profit from the sector and not enough competition: not great for either consumers or introducers.
First-time buyers First-time buyers continue to struggle with the hefty deposit criteria and on that, at least the lenders and the council of mortgage Lenders has finally recognised that this is the issue and quietly
year, with the extra news that house prices may fall by a further 10% over the next two years. Always on the up that Roger Bootle! Personally I’m not entirely convinced it’s possible to give a valid forecast for 2013. I’m finding it hard enough to make sense of 2012. The football and Olympics will have an effect, plus we have the Eurozone crisis, so usual seasonality is difficult. We have seen some improvements in the availability of funds, and according to the Halifax and Nationwide indices house price falls are generally slowing over time. Looking at Halifax’ latest report for example, the average monthly change was -0.5% to £161, 132 and Q3 figures are holding steady at 0.1%. All makes it difficult to predict with confidence. No change is my current prediction and use 2011 outturns as a decent estimate of 2012.
dropped its defence “there’s no consumer demand for our products”. Yes there is plenty of demand - it’s just that consumers haven’t got the deposit but can afford the loan. it’s great to hear that HSBc is investing an additional £350m in first-time buyer lending and plans to launch a range of high LtV deals in the coming months. as its product range until recently, concentrated generally on remortgaging with lower LtVs (sensible from a risk and capital perspective), this first-time buyer initiative is an excellent example where they have significantly added to the housing market and these funds are very welcome. i firmly encourage it to lend into this sector – its contribution is applauded and the recently launched fee-free 85% and 90% LtV products will be going some way to help first-time buyers. it would be nice if they gave us brokers a chance of it - but that seems unlikely!
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