News Review: Buy-to-let
Buy-to-let will continue to grow and develop by
David Finlay, intermediary managing director, Barclays
Now that Christmas is out of the way, not in a bah humbug tone you understand, we can really focus on the year ahead. Having said that, it’s not always easy to shake off the festive pe- riod hangover, especially when traditional yuletide films such as A Christmas Carol, then the promise of New Year resolu- tions, can’t fail but to make you somewhat reflective, both on a personal and business level. Tinking about the Dickens
classic, the visits of Jacob Mar- ley always send a little shiver down the spine but that’s not the only paranormal activ- ity to cast a lingering shadow. In a business sense the ghost of mortgage past certainly continues to haunt the mar- ketplace. Te ‘good old days’ proved to be a lucrative time for many, especially those op- erating in the non-prime and buy-to-let sectors. As such it’s not always easy to forget those times of plenty, particularly when reflecting on the current number and variety of avail- able deals in the buy-to-let arena. But, as I’m sure we all now realise, those days of old are gone and won’t be revisited anytime soon. Which brings us to the ghost
of mortgage present. So let’s take a brief snap shot of some statistics and data to reflect on current market conditions in the buy-to-let arena.
Safeguarding retirement Data from the Council of Mortgage Lenders shows that
the value of buy-to-let lend- ing in the first nine months of 2012 amounted to £11.8bn, 19% higher than the £9.9bn advanced over the same pe- riod in 2011. A greater proportion of
landlords are said to be turn- ing to the private rental sector to help safeguard their financ- es for retirement says the latest BM Solutions/ BDRC Conti- nental survey. Estate agency chain Kin-
leigh Folkard & Hayward re- ports that it has seen London rents increase by an average of 5% compared with the same time last year. Research from Paragon suggests
Mortgages that on
average landlords who pur- chased property in the run up to Q3 2012 increased their portfolios by 1.8 properties which is a decrease on the last quarter and reverts back to the investment levels seen earlier in the year. LSL Property Services’ latest
landlord survey indicates that four in 10 landlords expect to increase rents over the next 12 months while just 1% say they expect to lower them. Of the 1,223 landlords
polled for the survey, 10% are anticipating greater than 5% rises.
Feeling upbeat Te latest landlord survey from CHL Mortgages suggests that nearly 71% of landlords are upbeat about the sec- tor’s prospects in the coming months, with just 4% harbour- ing a negative outlook. Many lenders, including
Barclays, have also slashed rates in recent weeks to bring a more competitive edge to the buy-to-let marketplace. Tis is
10 MORTGAGE INTRODUCER JANUARY 2013
especially apparent amongst 2-year fixed rate deals at 75% LTV which are currently prov- ing highly popular with inves- tors and landlords looking for certainty with their mortgage repayments. Rate cuts from a number of lenders bode well for a welcomed increase in competition and also help in preparation for the visit from the ghost of mortgage future. In A Christmas Carol this
particular visit results in Eb- enezer
Scrooge having an
epiphany and repenting on all his past sins. As we touched on earlier we,
as an industry, are still feeling some of the past ‘sins’ inflicted by shall we say some overzeal- ous lending. But the current market should not be tainted by the past as lots of sensible lending criteria has been im- plemented to repair much of the damage done. Te only similarity between
current conditions and A Christmas Carol is possibly the scrooge-like appetite of some lenders especially at those higher LTV levels. However, this is completely understand- able due to lingering risk and funding concerns. Aſter all it is imperative not to revisit the mistakes of old in order to keep building steadily on the
solid foundations that
have been laid over the past 18 months or so.
Growing market Looking forward I’m going all Dickens again when I say that I have great expectations for the sector as a whole. Of course Great Expectations is one of the most famous com- ing of age novels and the link is befitting in that whilst buy- to-let has long been one of the
most resilient sectors in the mortgage market it is also one that will continue to mature, grow and develop. Evidence gleaned from the
market suggests that demand for rental property remains high and continues to out- strip supply. With no sign of an immediate fix for afford- able housing this demand is certainly going to carry on rising along with the resultant rents. Professional landlords will continue to go about their business and take advantage of these conditions by steadi- ly adding to their portfolios. Tenancy agreements appear to be getting longer with ten- ants ‘locking in’ for longer and landlords appear happy to oblige to combat any potential periods of rental voids. In terms of products
the
market is still crying out for innovation and competition. Lenders will try to bridge this gap in 2013 with more prod- ucts and new entrants emerg- ing but whether we will ex- perience substantially greater product numbers in the higher LTV bands and niche areas such as
the HMO/student
market or light refurbishment products remains to be seen. I expect areas like fees, both
in terms of application fees and proc fees, underwriting and service to also come un- der increased scrutiny in the year ahead as the intermedi- ary market demands more to meet this increasing demand. It’s clear that some good progress has been made in 2012 but there still remains some way to go before we can banish the ghost of mortgage past and appease the ghosts of mortgage
present and
mortgage future.
www.mortgageintroducer.com
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