OPINION


their existing lender.The newly self- employed, those reliant on pure ‘interest only’, those nearing retirement, or those with credit issues are facing a 2011 full of challenges, if not potentially the major issue of having no real options at all.


Consolidating debt into a mortgage Rolling unsecured debt into a secured debt mortgage commitment has become ‘habitual’ for thousands of homeowners over the last decade. Many homeowners overspend, whether through choice or necessity and have historically relied on their ability to consolidate this debt every few years by way of a further advance when remortgaging or with their existing lender. The 2011 market will bring a great deal of anxiety and financial hardship to many families as if property prices drop as many economists predict in 2011 (three per cent and 10 per cent are just two of the current predictions) restricted equity for many homeowners, combined with tighter credit scoring and more lender reliance on ‘affordability’ models by lenders, will mean the availability of further advances will be sorely tested for many borrowers. For those who cannot consolidate, the


reality of maintaining ‘unsecured’ payments will make 2011 a long and testing year financially, and for those who are paying significant sums per month to cards and loans, there is a genuine risk that many lenders will not wish to lend remortgage funds for the main mortgage due to their obligation to the Financial Services Authority to embrace strict affordability models. This ‘Catch 22’ scenario could lead to some very difficult financial decisions for many thousands of families in the UK as the 2011 market develops.


buy to let purChasers With 2011 we will see some continued, while modest growth in the BTL sector, as experienced landlords and high worth clients in particular take advantage of being cash rich and access BTL mortgage deals where many are no longer eligible to do so. The New Year will also see many investors compliment pension strategies with some property acquisition. Improved product availability will aid


this sector of the market as lenders offer 80 per cent products and more brands re-enter the marketplace. 60-75 per cent borrowing will continue to offer the best value and the 2010 trend of inflated arrangement fees will continue to dominate


the BTL mortgage market next year with set up fees ranging from 1.5-3 per cent. There will be some other fundamental characteristics of the 2011 BTL market well worth noting, for example lower LTV’s for New Build property being an established trend. Lenders are also restricting BTL


borrowing per client quite significantly and this will continue in the New Year, with Birmingham Midshires leading the way, having reduced their criteria from multiple millions to three properties per applicant at any one time. 2011 will also see more ‘tactical’


purchases in the BTL market. Landlords will buy ‘off season’ and at auction to


uncompetitive 90 per cent products, the average age of a FTB in the UK will be 37.5 years of age by the middle of 2011. Combine this with over 80 per cent of FTBs using family funds as a deposit or asking parents to act as guarantors and we have the most fragile area of next year’s marketplace by some distance. While FTBs can plan ahead by saving


and by creating a credit history by opening bank accounts and, ironically, by servicing some well paid debt on, for example, a visa card, the real responsibility lies with the British government and in turn the lenders who have received hundreds of millions of pounds of government funding. 2011 must bring a significant


improvement to the lending policies of many prominent brands. With RBS/ Natwest and Lloyds offering 6.99 per cent and 6.89 per cent respectively at 90 per cent, we see the Skipton BS offering 5.78 per cent over the same 5 year period. What message does this send to the market? Does the government care and are they applying pressure to lenders they have influence over? Should the UK’s sixth largest Building Society be more than 1 per cent cheaper than two brands who advertise their market leading product offerings to the Great British consumer? UK wide First Time Buyers must


Inflated set-up fees of 1.5 to 3 per cent will continue to dominate the BTL market in 2011.’


achieve lower purchase prices and expect a significant upturn in landlords buying in their local areas, taking comfort from local contacts and knowledge of their home area.


First-time buyers The First-Time Buyer will remain the ‘hot potato’ of the 2011 market. Whether lenders can keep their promises (which were undoubtedly broken in 2010) is a source of animated debate in many quarters of the marketplace. As lenders shy away from the FTB market with


complain about lenders 90 per cent rates and lobby politicians for an improvement. If 2011 is to see any improvement in market conditions the marketplace must demand that those borrowers making that first tentative step onto the property ladder are given a realistic opportunity to do so. In summary the 2011 market will remain


demanding and there will be many challenges. There are however many products which can facilitate most mainstream transactions. Planning ahead is the key, as is understanding the market next year. Borrowers should combine a clear picture of what they hope to achieve next year with quality independent mortgage advice from a professional advisor who can offer a good understanding of an ever-changing marketplace.


David Carmichael is a Director of Taylor Carmichael Financial Services and has been providing independent mortgage advice within the UK market for 18 years. www.taylorcarmichael.co.uk


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PROPERTYdrum JANUARY 2011 29


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