Some scope for optimism in the buy-to-let market
I read this article this morning on the Property Talk Live website and thought it was worth putting out as a blog. It seems there is the beginning of some improvement in the availability of buy to let mortgages with some 80% LTV products becoming available. This is mirrored by what our contacts in the mortgage market are telling us. Although one client was quoted £6,000 in fees for a buy to let mortgage. Maybe a new government will look kindly on the private rented sector
Data published by the CML shows that buy-to-let activity in the first three months of this year settled back to former levels, following a modest upturn in house purchase by investors at the end of last year triggered by the stamp duty holiday.
As a result, the number of buy-to-let loans declined by 15% to 22,000 in the first three months of 2010. Over the same period, the value of lending also declined, by 12% to £2.1 billion.
Leaving aside the impact of the stamp duty holiday, however, buy-to-let lending has now remained broadly flat over each of the last five quarters.
Compared to the first quarter of 2009, the value of buy-to-let lending in the first three months of this year is unchanged, while the number of loans declined by just 2%.
Low interest rates are continuing to contribute to a modest improvement in buy-to-let arrears. At the end of March, the number of loans with arrears of more than 1.5% of the mortgage balance totalled 19,300 (1.56% of all buy-to-loans), compared with 20,700 (1.69% of loans) at the end of 2009, and 28,800 (2.47% of loans) a year ago. The number of buy-to-let properties taken into possession in the first quarter of 2010 totalled 1,400, an increase from 1,200 taken into possession in the preceding three months but unchanged from the total a year ago. Meanwhile, cases where a receiver of rent had been appointed totalled 11,200 at the end of March, down from 11,900 three months earlier but up from 9,200 a year ago. These cases are similar in many ways to a lender taking possession of a mortgaged property, with the landlord being removed and the receiver collecting rent and passing it on to the lender to apply to mortgage payments.
Commenting on the figures, the CML's director general Michael Coogan said:
"Ignoring the effect of the stamp duty holiday, the lending figures show that the buy-to-let market has settled into a period of stable, low-volume activity. Generally, prospects for the rental market are good. But uncertainty over house prices, interest rates and the availability of mortgage funding is continuing to hold back the buy-to-let market at this stage.
"We also want to see how the new coalition government takes forward the Treasury's initiative to encourage higher investment in the private rented sector, bearing in mind the scope for growth that exists to meet future demand from tenants. There is a case for targeted measures in the Budget, even though the primary focus will be the fiscal deficit."
David Whittaker, managing director of Mortgages For Business, said:
“This fall in activity isn’t as negative as it appears on the surface. We expected there to be a rush on buy to let mortgages at the end of last year and a subsequent drop in activity coming into Q1 2010. What is encouraging is that the likes of TMW beginning to loosen the purse strings. Their new 80% LTV is a very welcome addition and will encourage other lenders to follow suit. With new players about to emerge onto the scene more funding will be brought to the market and the prospect of fresh liquidity is excellent news. The increase in LTVs and new money entering the market might not be reflected in quarter two’s figures, but the activity numbers will look a lot stronger moving into the second half of the year. The future is certainly looking a lot brighter for the buy to let sector.”
Alison Beech, Business Relationship Director at Spicerhaart said:
“While it is disappointing that buy to let lending fell in the first three months of the year, things are already looking up for the sector. The launch of TMW's very welcome new 80% LTV product will enable some movement from both new investors and those refinancing their existing portfolios. This may encourage other lenders to follow suit. However, concerns remain over the proposed increases in capital gains tax for non-business assets, and we urge the government to offer some clarity on its intended policy.”
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