Increase in fixed rates as "perceived" inflationary pressures start to build

Mervyn King hinted in his Mansion House speach that there were some signs that quantitative easing was starting to work and that the £125Bn injection may be sufficient - I really hope so !!

The SWAP markets had already reached the same conclusion with 3 year SWAP rates bottoming out in February at 2.3%, having hit 3.11% earlier this month but now bacl at 2.98%; we doubt that it will suatain a sub 3% position for very long. And sadly lenders have reached the same view and have been gently pricing upward on prodcuts to absorb a likley higher level of underlying pricing.

On the plus side lenders are looking forwards and starting to initiate discussions about criteria improvements and changes to product profile. Rest assured this has not been a topic of discussion since the autumn of 2007. Two niche lenders are looking at new Buy to Let offerings that might cater for limited companies or HMO properties, albeit at a price. The judgement, thereafter, is whether the ability to raise extra capital and perhaps conclude an additional deal is justifiable against a higher cost.

We will get back to you with an e-newsletter in the next week or two but if you want to chat through any scenarios in the meanwhile we can formulate a plan with you that is ready to go when the lenders start to change their stance.

The importance of BTL Landlords to a housing market recovery

In previous property downturns, journalists and indusrty pundits have focused on First Time Buyers as the necessary first step in stabilising the capital values of property. But this overlooks the role of landlords in the market which historically difficult to track but who in the last 15 years have increased their activity to some 12% of all housing stock.

Critically lenders used to treat residential invetsment and in previous recessions they would continue to advance funds to favoured clients as Business Loans but simply secured on residential property - extraordinary but in 1993 and subsequently we saw many such facilities as landlords sought to increase gearing. From these entrepreneurs from that period came the idea of branding Buy To Let for which Andrew Reeves of ARLA has never received the recognition that he desreves for the phenomenon that followed.

The idea that market recovery depends on First Time Buyers is fine if you are happy to wait for the trickle down effect into 2nd and 3rd time movers as pressure builds up - however Buy to Let landlords are active on the second and third rungs of the property ladder as they tend to seek 3 and 4 bedroom properties that have greater yields. Their issue is availability of funding and certainly in the short term lenders will focus their attention on First TIme Buyers but there are signs of lenders recognising that Buy to Let landlords are more part of the solution than part of the problem.

We are talking actively with existing lenders and potential new entrants to the market to redress the balance and for them to take on board the notion that support to Buy to Let Landlords may accelerate the rate of recovery of the housing market as a whole. If you are still experiencing funding frustrations give us a call - it might surprise you the level of support that might be available.

Base Rate remains unchanged at 0.5%

As expected, the Bank of England have kept Base Rate on hold at 0.5% this month, halting the steady trend of reductions over the last few months. With the MPC’s ammunition more or less spent in this area, all eyes are now on the Bank’s Quantitative Easing programme designed to stimulate the much need liquidity into the market.

As mentioned in numerous blogs and articles over recent days, mortgage rates would appear to have bottomed out and now is the time to act if you are looking for competitive Residential mortgages or Buy to Let mortgages. Our Fixed Rates are proving popular with both homeowners and investors with many borrowers now looking to lock into 2, 3, and 5 year rates before the cost of funds starts to rise over the coming months.

For those of you looking at Commercial Mortgages, there are again some good deals to be done whether you are an investor, developer or are looking for premises for your own business. Despite what you read in the press, Banks are lending and with the cost of funds relatively low, there some very attractive commercial rates available for the right deal.

Never before has it been so important to use a specialist adviser to guide you through the products available. Our consultants are on hand to help with your  finance requirements so please feel free to get in touch – it will not be long before rates are on their way up!

The Turner Review may impact Buy to Let warns Lord Turner

The Tumer Report covers a broad range of sectors but has reserved its judgement on Buy To Let and second charge mortgages until September. If some of the commmentary on how they might restrict Loan to Income multiples might be applied in future goes ahead in its current form (such as 3.5 x Multiple applied whether interest rates  are 12% or 4% rather trhan expressed as a%age of disposable income with in a minimum notional rate to cater for articially low rates like now !!!), then the Buy To Let lenders will be facing an uphill struggle.

There is an essential principle at stake which is being overlooked. Buy To Let is a business activity whether you own one or 350 properties. You are in it for profit and drawing a line between the owner with a single Buy To Let to enhance their overall retirement provision  to the active landlord refurbishing property , extending others, perhaps even selling some to use up CGT gains would require the judgement of Solomon which has been remarkably lacking in the FSA to-date.

In its effort to regulate Buy To Let it is likely that the FSA will create a regulatory monster so as to embrace all the complexities of a Buy To Let property and the business aspirations of the borrower......this might add such a burden to the time and "real" cost of the process that borrowers will approach lenders on a commercial mortgage basis to avoid the FSA paper trail. After all, this is where Buy To Let came form and many professional landlords keep Buy To Let property in "pot" facilities at banks.... or do we think that the FSA proposes to move further up the lending scale to include all aspects of business lending ???

There is also a tendency for some commentators to suggest that the lender and broker to a transaction are giving investment advice to the borrower at point of purchase which is false. Quite correctly the Buy to Let mortgage or loan needs to suit the borrower's needs but whether the investment or is appropriate or will perform over time is the commercial decision of the borrower.

Read the Turner Report here.

Lloyds/ HBOS commit additiomal £3Bn to mortgages this year

The news that Lloyds/HBOS has finally agreed to a deal on the APS will increase its mortgage lending in 2009.

Lloyds / HBOS fell on the sword finally and gave up some £260Bn of "assets" into the APS and in return found  UKFI now owning 65% of its shares and a commitment to increase its proposed mortgage lending from £9Bn to £12Bn this year. The split between pure residential mortgages and Buy To Let mortgages has not been defined but a cynic might argue for a bias towards the former group as that is where votes in any upcoming general election would lie.

An additional £9Bn is also promised to business lending but the challenge as with all these things is proving the benefit ie borrowers actually finding it easier to obtain credit.

You can follow developments on our quantitative easing updates and views page.

Now that Base Rate has dropped to 0.5%, it's time to fix!

As expected, the MPC has continued to use the tools at its disposal and slashed rates again to a record low of 0.5%.

This will of course continue to improve the cash-flow of those borrowers on Base Rate linked loans (without collars!) but unlikely to have much of an affect on new mortgage products.

Only a 3rd of lenders passed on any of last month’s 0.5% cut and I would expect even fewer lenders to act this month. That said, there are a handful of lenders (C & G, Nationwide, Skipton & Halifax) who have Standard Variable Rates (SVRs) that must never be more than a set percentage above Base Rate – they will have no option but to reduce their SVRs. For the rest, don’t expect much movement and for those of you looking to move house or remortgage, I would reiterate that the products available now are probably as good as they are going to get and if you are looking for fixed rate mortgages for your home or Buy to Let fixed rate mortgages over the next 2, 3 or 5 years then now is certainly the time to act.

The additional announcement that the BoE will embark upon £75Bn of asset purchases financed by the issuance of central bank reserves is a welcome move in terms of trying to improve liquidity. Perhaps the most significant phrase in the published statement was "in the first instance" thus demonstrating the BoE's commitment to stimulate the economy with a series of measures if necessary.

None of this will change the economy and, in particular, the housing market overnight but these are alll essential building blocks on the way to recovery.

Northern Rock resumes lending - what will be its impact?

The announcement that Northern Rock is to resume mortgage lending (£14Bn by the end of 2010) is welcome for the mortgage market as a whole but will probably only drive indirect benefit for the Buy To Let sector.

The gov't announcement on Monday that Northern Rock will resume lending on homeowner mortgages with £5Bn this year and £9Bn in 2010 came after weekend speculation that NR would be lending £15Bn - funny how the press always seem to know what happens at NR before any real announcement.

The fact that only £5Bn will be lent in this year is acknowledgement that it will take time to build a pipeline from which to complete the loans. Given that we are approaching the 3rd month of the year this is a pragmatic figure for the remainder of 2009. They have been doing some lending over the past few months so it won't be difficult for then to gear up their operations.

That aside it is good news for the market for the following reasons...................

More money supply and improved lending criteria will help to ease the credit crunch and provide some competition in the residential mortgage market. As a consequence real lending margins may reduce slightly.

Whilst NR are unlikely to promote Buy to Let mortgage lending (they do actually have a couple of pricey Buy to Let products) the element of competition may encorage other lenders to switch some resources from residentail to Buy to Let lending.

Additional funding for personal residential mortgages is a pre-requisite for stabilising the housing market as a whole and much of the Buy to Let property is First Time Buyer or Second Mover property which will receive an uplift if homeowner borrowers start to re-emerge at the Estate Agents !

All in all a welcome development.