MORTGAGES
Low Loan-to-vaLues One of the barriers to lending over the past 12 months has been the banks’ reluctance to lend at higher loan-to-values, namely anything above 80 per cent. The days of 90 per cent, 95 per cent and 100 per cent mortgages are a distant memory, but with borrowers still having to find 25 per cent deposits, this has been a barrier to entry for first time buyers in particular. Lenders still appear to have little appetite for the first time buyer market, preferring to play it safe and target low risk borrowers. However, there has definitely been some movement in LTV levels since the beginning of 2010, with significantly more deals available at LTVs of 85 per cent and 90 per cent. Although average levels are nowhere near those of 2007, they are higher than at any point during the past two years. Currently 36 different brands are offering 90 per cent LTV mortgages through intermediaries and direct deals, while at 85 per cent LTV our brokers can chose from 800 products. Not surprisingly, the best deals are still at
LTVs of 75 per cent or less. ING Direct is offering 60 per cent LTV fixed until 31st March 2013 at 3.05 per cent with a £945 fee. While at 75 per cent LTV, Accord Mortgages are offering a very competitive fixed rate at 3.29 per cent, again fixed until 31st March 2013, with a £995 fee, and Coventry Building Society has a 3.29 per cent tracker mortgage, again expiring on 31st March 2013, with a £999 fee. At 90 per cent LTV there is a predictable
large jump in rates, although HSBC offers an attractive two-year fixed rate at 4.99 per cent, with a £99 fee. For a lower rate, Britannia Building Society’s 4.29 per cent tracker until 28th February 2014 stands out, however the fee attached is £999. A notable trend in the past three to four
months has been borrowers increasingly choosing fixed over variable rate deals. Mortgage Advice Bureau figures confirm that market sentiment has definitely swung back towards fixed rates with three quarters of purchase mortgage applications processed in January by its brokers for fixed deals. This compares to 12 months ago when the majority of mortgage applicants chose variable rate products, in the main to take advantage of the historic low interest rate environment. However, with the dark cloud of
imminent interest rate rises looming ominously overhead, increasingly nervous borrowers have migrated to the safety of fixed rate products.
Buy-To-Let is expected
to account for approximately eight per cent of the UK mortgage market in 2011.’
ReMoRtGaGe On the remortgage side, after subdued activity in the first nine months of 2010, remortgage numbers started to pick up in the fourth quarter as borrowers who were on their lender’s Standard Variable Rates (SVRs), took advantage of the low Base Rate, fixing on attractive rates while they had the chance. With some lenders starting to raise their SVRs, this was the shot across the bow that many ‘wait-and-see’ borrowers needed to make the decision to fix. Unfortunately there is still a large number of remortgage customers who have seen their equity levels eroded and do not meet the affordability and servicing debt criteria that many lenders have moved towards, that have little choice than to remain on their lender’s SVRs, and at the mercy of the MPC members. For new borrowers who do not want to
leave themselves exposed to rate rises over the next few years, there are some competitive four and five-year products on the market at the moment. HSBC has a five-year 60 per cent LTV fixed deal at 3.99 per cent, with a £99 fee. While Leeds Building Society is offering a five-year 75 per cent fixed mortgage at 4.35 per cent and an 85 per cent fixed for five years at 4.69 per cent, both with £995 fee attached.
Buy-to-Let BoRRowinG If the mainstream residential market has experienced a turbulent two years, it is nothing compared to the turbulent waters the buy-to-let market had had to navigate. It seemed almost an overnight phenomenon that specialist lenders such as The Mortgage Business and Bank of Ireland completely exited the market. Of those who remained, namely the big banks, all drastically curbed their buy- to-let lending, as they themselves found that securing funding on the wholesale market proved to be almost impossible. They were not willing to lend above 75 per cent LTV levels, leaving the market accessible only to the professional or experienced landlord. What we have seen recently is a growing
appetite again for this sector of the market, and buy-to-let is expected to account for approximately eight per cent of the UK mortgage market in 2011. Several lenders have entered or
re-entered the market, including buy-to-let specialist Paragon Mortgages who opened its doors for business again last September. Fortunately, at last, the future is looking decidedly rosier for the embattled buy-to-let market. In February, Kensington Mortgages announced the first 85 per cent buy-to-let mortgage for landlords in two years, a deal that they promise will cater for first time landlords, not just experienced investors. With 120 per cent rental cover required, it perhaps represents the a brighter dawn. However, Kensington is the lone wolf at
the moment offering an 85 per cent LTV BTL product, with the majority of deals still at the 65-75 per cent LTV level. Nottingham Building Society has a 75 per cent LTV fixed at 4.99 per cent until 1st March 2013, with a £1,495 fee, while Coventry Building Society offers a 65 per cent LTV fixed rate at 4.35 per cent fixed until 31st March 2013, with a £1,249 fee. It is going to be an interesting year for
the mortgage market, a watershed year perhaps. The adverse impact of expected rate rises could be countered by lenders playing ball and relaxing their lending criteria – whether they will though is anybody guess.
Brian Murphy is Head of Lending at Mortgage Advice Bureau
www.mortgageadvicebureau.com
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PROPERTYdrum MARCH 2011 31
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