MORTGAGES
For buy-to-let purchasers,
agents could refer them to the Landlord Centre’s free buy-to- let mortgage finder on its website. Andy Young, chief executive, says that Landlord Centre doesn’t charge a fee for the service – and has a specialised team, which High Street lenders don’t. But with 90 per cent of landlords already using a broker, it may be that agents don’t have too much to do – John Heron says “ask your buy- to-letters if they are using a mortgage broker; that in itself sends an immediate signal that they are serious.” However agents might be best advised
not to be too hands-on, says Ray Boulger. Ideally, they should have a small panel of firms, he believes - “perhaps three firms that the estate agent has confidence in, thus giving the buyer some helpful choices without worrying whether the broker is in the pocket of the estate agent.” He points out that agents who try to
arrange mortgages themselves may have – or be perceived as having – a conflict of interest. Specifically, the Estate Agents Act makes it illegal for an agent to consider offers only if the buyer sees their in-house mortgage adviser – and that includes heavy hints, he says; “To someone whose primary concern is not losing the dream home they have just found an implied threat has the same impact as actually breaking the law.” It is even more difficult to secure finance
where auction properties are concerned. Scott Hendry, National Development Manager at Auction Finance Limited, says, “It’s all too common for high street banks to pull out of funding an auction transaction because of the short timescales for completion.” Bidders who have agreements in principle sometimes find that the loan can’t be granted because the
It’s all too common for high
street banks to pull out of funding an auction transaction
because of timescales.’ SCOTT HENDRY AUCTION FINANCE
44 JULY 2012 PROPERTYdrum Capital Economics
expects a 5% fall in house prices each year for the next four years, an aggregate 20%.’
property needs to be refurbished. Auction Finance reckons that so far this
year, 30 per cent of their property investors have had to use bridging finance to fund their purchase because their previous lender has let them down. Andy Young notes that while the buy-to-
let market is back in action, multi-unit lets and refurbishment projects are still difficult to finance. Paragon and Kent Reliance have a good range of products for multi-unit lets, but there are relatively few other lenders in this area. “It could do with further innovation,” he says. “Likewise, the choice of products for light refurbishments is also lacking, which can be frustrating for landlords;” only The Mortgage Works currently has a mainstream product for refurbishment projects.
ANY GOOD NEWS?
Still, the buy-to-let market hasn’t seen such a bad pull-back of mortgage availability as the owner-occupation market, according to John Heron. “Every month we see the figures on buy-to-let increasing,” he says. “The credit quality of buy-to-let is improving, compared to the mortgage market as a whole,” with high rental levels feeding into the affordability calculation. Buy-to-let offers a very strong credit risk,
but lenders are still likely to want to have a position in that market even while owner-occupation loans are under pressure, so he doesn’t believe we’ll see another credit shortage in buy-to-let the way. However, the immediate difficulty of sourcing finance for individual borrowers is not
the only thing worrying the industry. The lack of mortgage availability that has held the
market back in recent years, and a further reduction in supply could lead to even lower transaction levels,
and potentially, falling prices. John Heron believes the situation is
unlikely to get better. “If you look at the mortgage market as a whole,” he says, “the consequence of there being less capital available to lenders, and tightened conduct of business rules, will be it’s more difficult for first time buyers or home movers to secure the mortgage they want. The pressure that we see on the owner occupied sector at the moment is very likely to continue.” (That represents an opportunity, of course, for the private rented sector, to take up the slack.) Research house Capital Economics
expects a five per cent fall in house prices each year for the next four years, citing economic headwinds, higher mortgage interest rates, and tighter credit. An aggregate 20 per cent fall, intriguingly, agrees with the Economist’s assessment of the UK as 20 per cent overvalued on an income ratio basis, and 28 per cent overvalued by comparison with rental levels. The scary thing, though, is that Capital Economics made that forecast before the recent pullback in lending. Mortgage approvals so far this year have
been soft. The aggregate BBA mortgage figures for April show a small rise – but all the growth was due to remortgages. Mortgages for house purchase actually fell from 11,809 to 11,200, 6 per cent down. Meanwhile as Ed Stansfield at Capital Economics points out, the quarterly rate of change has deteriorated sharply, and we are facing a “slow downwards grind.” With mortgages more difficult to find, and interest rates on housing finance increasing even though the base rate remains at record lows, it’s hard to see the housing market getting better; the question is how much worse it might get.
Do you have any views to share?
www.propertydrum.com/articles/mortgages0712
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