Market awaits Year End movements at Banks

Many leading financial instituations with a 31 December Y/E will be adopting the well practised approach of hording cash on the Balance Sheet on the final day of the year.

In normal times they would unwind these positions in January and LIBOR and Bank Base would be closely matched by the month end. However with the prospect of another 1% or more Base Rate cut in January on the back of deepening economic gloom the opening meeting of the MPC (announcing on Thursday 8 Jan 2009) could boost the premium even further in the short term.

However this will lead to further reductions in SWAP rates and lenders will start to roll-out new domestic and Buy to Let products in the coming weeks. The issue may well be that "demand exceeds supply" so letting your broker know what you want by way or pricing should precent disappointment if lenders come to market only with limited tranches. We can then notify you when funds are launched that suit your purpose.

2009 will be an interestring year with some good opportunities - the NAEA are predicting a property spike already as there could be a shortage of stock with very few new homes coming out of the ground.

Merry Christmas and here's to a better 2009!

To new and regular visitors to our Buy to Let Blog, I would like to wish you a very merry Christmas and a happy & healthy New Year. 2009 will be a tough year but as always, Mortgages for Business is well placed to advise and assist with your funding options.

Base Rate looks set to reduce further (don’t be surprised to see a further 1% cut as early as January!) and I predict that Base Rate will fall below 1% before the half year. Great news for all those on Base Rate tracker mortgages and many portfolio landlords will see improvements to cashflow as those tracker mortgage repayments continue to fall in the New Year.

The availability of Buy to Let mortgages remains an issue and despite the rapid fall in Base Rate, lenders will be taking a cautious approach going into 2009. The 3m Libor rate remains a full 1% higher than Base Rate and despite the Treasury’s efforts to get Banks lending to each other again, it may still take a month or two before confidence returns to the money & mortgage markets. That said, with SWAP rates bottoming out, I would expect to see the introduction of attractive 3 and 5 year fixed rates early in the new year and I would strongly recommend landlords to consider locking into decent 3 and 5 year money early in 2009. Mortgages for Business will continue to keep landlords updated as new products are launched.

With the New Year will come opportunities for those landlords who are in a position to purchase and add to their portfolios. Whilst there are many economists predicting a further 10 – 15% reduction in house prices, many landlords are taking advantage of the current climate and snapping up bargains where possible. Funding for purchases is available but as mentioned in previous blogs, lenders are looking for minimum deposits of 25-30% and investors should be prepared to pay more commercial type rates for what, in essence, is a commercial transaction. Our Landlord Information Zone can give you more insights.

I will update you further in the New Year when we should get a clearer idea of lender appetite and product availability. In the meantime, enjoy the festivities and all the very best for 2009.

3 month LIBOR continues to ease slowly

There will be a limit to its downward movement towards the end of the year as those banks with 31 December year ends preserve cash on their balance sheet and let creditors rise accordingly. Effectively it may not go much below 3% in the short term yet with Base Rate at 2% it needs to get going again early in the New Year as pressure for another 0.5% cut down to 1.5% rises on the back of ever declining economic data.

In more rational times the MPC would wait until the retail sales figures for December were available along with preliminary January Sales from the major high street stores as well as the Quarterly inflation figures ahead of the February MPC meeting. But these are extraordinary times and with many retailers already having Sales in November and December, I am left wondering what they have left to discount come January - indeed, with rising unemployment and general consumer nerves, will anyone be out spending anyway ???

So a cut to 1.5% in January might even be followed by a further cut of 0.5% in February bringing BBR to a historical low of 1%. There will be little purpose to driving BBR even lower as bizarrely this may start to push SWAP rates up as the prospect of inflation will bring forward the time when rates start to go up again. Far better to provide a longer period of stability within which borrowers in all walks of life can source attractive fixed rate Buy to Let mortgages at all time lows.

Buy To Let lenders have a few products below 5% (the best is currently a 2 year fix from The Mortgage Works at 4.49%) but this number should increase in January. 

Another encouraging sign is the number of products on our Buy to Let Sourcing System (now branded Morgage Flow) has risen in the past week to 109 different morgages. We expect this number to grow from mid January onwards........ 

LIBOR, SWAP rates, base rate and interest rates - we're seeing history being made

The Bank of England's decision to further reduce Bank Base Rates (BBR) in December, to rates not seen in over 50 years, demonstrates the analysts view of the severity of the current economic turmoil.  Whilst we don't appreciate it at this time, history is being made and events now will be talked about long after we are gone.

The reaction of the banks in setting LIBOR and SWAP rates over the past week have followed a similar trend to that displayed following the two previous BBR reductions in October and November.  As before, SWAP rates have reacted much quicker to the changes with 1 and 2 year money currently standing at 0.45% and 0.91% over BBR. These rates have fluctuated in the past few days, but the trend is still downwards from their peak in late June.  

LIBOR however, has again dragged its heals and although there has been much criticism of the banks to stimulate the flow of money, LIBOR remains well above BBR. Following the latest Bank of England rates decision, LIBOR sat at 1.72% above BBR.  This fell by 0.34% to 1.38% over BBR the next day, but this was the last significant fall.  Since then, LIBOR has fallen more modestly, but still remains stubbornly well above BBR.  As at today, it is 1.25% above BBR a far cry from the 0.02% below BBR in January 2008. 

As many lenders fund off of LIBOR, or set their rates for a 3 month period, it has meant that despite the reduction in funding costs, not many of the lenders have yet adjusted their rates.  Two of the best known names TMW and C&G have reset their Buy to Let rates this week and it is rumoured BM Solutions may have some new products just before Christmas.

 

With Christmas around the corner and some lenders also reaching their year end on 31st December, the speculation is for little activity from the lenders until January, when they will look to get 2009 off to a better start than 2008 has finished.

More needs to be done by the banks to ease borrowing rates.  The first signs have appeared in the residential sector, with new products in the mid 3% region, which appears to have increased the number of buyers in the market.  The lenders need to regain some confidence on buy to lets, hopefully this is not too far away.

3 month LIBOR comes down to 3.99%

The actual 5 bp reduction was not significant albeit that normal daily reductions are about 3bp.

The significance of this move is bringing LIBOR below 4% and therefore the spread between LIBOR and Base Rate (BBR) below 100bp some 10 days before the MPC announcement on Thursday 4 December.

It seems almost certain that there will be a further cut in BBR in December - the debate is now whether that will be 0.5% or even a full 1%. This stems from the minutes of the MPC Meeting this month which show that they did consider a full 2% cut in November but only opted for 1.5% because they feared the nervous recation that this might have created. Since then the motor car industry in the UK has given dire warnings (the position in the US car sector is even worse) but conversely UK High Street retail figures for October were up 0.1% - there is already evidence of one or 2 day sales amongst the major brands....

And today sees the Chancellor at the dispatch box at 3.30pm unveiling his plans for fiscal stimulus......at 1.30pm the FTSE was up some 4.68%

Record fall in inflation paves the way for more rate cuts

The announcement that CPI has fallen to 4.5% leads me to believe that rates will be cut further in December and I wouldn't be surprised at all if the Bank of England slashes a further 1% off Base Rate before the year is out.

While the spread between LIBOR and Base Rate remains wide (3m LIBOR currently stands at 4.15%), mortgage rates will be slow to follow suit although we are starting to see some improved pricing in residential mortgage rates.

We have seen a couple of lenders this week launch fixed rate mortgages at 3.99% and tracker rate mortgages are available from 4.39%.

Buy to Let mortgage rates will be slower to return and it may not be until early next year when confidence returns to the money markets and lenders set their targets for lending in 2009.

Mortgages for Business nominated for three What Mortgage magazine awards

Mortgages for Business, the leading specialist buy-to-let mortgage broker, has been nominated for three awards in the annual What Mortgage magazine award programme – the maximum number of possible nominations the firm could achieve.

Nominations in the ‘Best overall adviser’, ‘Best buy-to-let adviser’, and ‘Best specialist adviser’ have been made by mortgage lenders, chaired by the Editor of What Mortgage, Nia Williams, and the firm is hotly tipped to scoop the board.

The nominations are made on the following criteria:

• Comprehensive pre-purchase information - clarity on the adviser; the level of service it offers; its remuneration methods

• Clear information - easy-to-read documents regarding the recommendations

• Service excellence - ensuring the client understands what they are recommending; making sure that the client is happy with what the adviser is suggesting; pushing through the mortgage quickly and thoroughly so the client moves quickly; keeping the client informed all the way through the process

• Commitment to customer care - easily accessible staff (including evidence of how they 'go that extra mile') and extensive staff training

• Not trying to force additional products on clients if they don’t want/need them

Jonathan Moore, Head of Marketing at Mortgages for Business, said: “We are thrilled with the three nominations. It is testament that our industry colleagues believe us to be among the best of the best.”

The What Mortgage awards take place on 22 May at the Café Royal in central London.

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

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Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739

Landlords brace themselves for increase in rental arrears from April

Rollout of new national payment directly to DSS tenants will cause problems for landlords

Landlords are reporting concern that the national roll out of the Local Housing Allowance (LHA - the replacement for the payment of DSS tenants’ rent) on 7 April 2008 may cause an increase in the number of tenants in rental arrears and could see some landlords and mortgage lenders pull out of the sector altogether.

From 7 April 2008 almost all local authority tenants will receive a LHA payment directly into their own bank account with the responsibility to pay landlords rents directly. Previously, rent would be paid directly to the landlord by the local authority.

If a tenant fails to pay their rent for over eight weeks then the landlord can make arrangements to receive rental payments directly from the local authority.

Jonathan Moore, Head of Marketing at Mortgages for Business, comments: “This scheme has been piloted in a number of areas over the past 18 months and we have received reports from landlords where tenants have struggled to cope with this responsibility.”

“Landlords face a dilemma; there are already a limited number of lenders willing to lend on property let to tenants relying on benefits and if tenants begin to default, lenders could further shy away making it more difficult for many landlords to fund the purchase of similar property - particularly given that lenders are becoming increasingly risk adverse due to the credit crunch”

“We will also be watching with interest to see if lenders make any changes to their lending criteria which makes funding properties in this sector more complicated. A few lenders may decide to opt for lower risk, high performance areas of the market, avoiding any risk in providing funding where there is potential for tenants to default on a regular basis.”

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Case Study

Mick Roberts a large portfolio landlord from Nottingham who has expressed doubts about the scheme and thinks the introduction of a two week rule would be more sensible to stop tenants from missing their rent payments. Mick is happy to be contacted to discuss his reservations about the scheme.

Notes for editors

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

For more information on products and services call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739

Buy to Let investors look to the high street

Mortgages for Business, the leading specialist Buy to Let mortgage broker, are reporting an increasing interest in Buy to Let flats above commercial premises. Mortgages for Business is currently the only UK broker to offer mortgages for this property type via their exclusive access to Keystone Mortgages.

“We launched the product in early 2007 and going into 2008 we have seen investors buying more and more of this property type.” Says, Jonathan Moore Head of Marketing.

Flats above commercial premises have in the past been viewed as undesirable to tenants. However in an increasing crowded rental market many renters are now exploiting their extremely spacious rooms and central locations.

Keystone Mortgages are one of the few mortgage lenders to fund this property type because many lenders have concerns around tenant attraction and factors such as smell above food outlets. This has lead to the flats of this type coming onto the market at comparably lower prices but with a similar potential rental value.

“Savvy investors are increasingly looking for higher yielding property types such as HMOs (houses in multiple occupancy) and flats above commercial premises as capital appreciation has steadied and rents have been increasing rapidly due to tenant demand. Additionally investors have more complex borrowing requirements such as using limited companies as an investment vehicle” Moore comments.

The Buy to Let market is increasing dominated by experienced portfolio investors and these investors are more comfortable with this property type, whereas newer investors will tend to be more wary.

Buy to Let funding and the credit crunch – what it means for you

The fourth quarter of 2007 has seen much speculation surrounding where the housing market and the Buy to Let sector are heading in 2008. Despite reports to the contrary the housing market has remained robust with a 2007 annual capital growth of approximately 6%, meanwhile Buy to Let lending grew to account for 12% of all new mortgages advances, compared to just 3% five years ago.

I’m sure we are all aware that lenders’ attitudes towards funding have become more cautious because of the situation in the US sub prime market causing the much publicised ‘credit crunch’. The availability of Buy to Let funding has lessened and criteria are becoming stricter to deny this fact would be foolish. However the situation isn’t as gloomy as it may seem. So what are the implications for you in early 2008?

Lenders are starting to focus distribution through their key partner relationships and are therefore not releasing products to the general market. Increasingly lenders will focus on the quality of the brokers and their clients with whom they transact, with lenders becoming risk adverse to brokers without a strong track record. Just because products are less widely available, it doesn’t mean there isn’t much from which to choose. Whereas we were ‘tracking’ some 700 products in our Bluesky sourcing system in September, there is still good coverage within the 490 products that we believe now deliver choice, competitive pricing and good service. We continue to offer our exclusive Keystone products that offer funding for Buy to Let properties above commercial premises. However even our leading product finance with some lenders is limited so we have introduced a booking fee system on these products to avoid speculative transaction lessening the funding pool available for clients.

Early 2008 is likely to see the cost of borrowing beginning to soften. December 2007 saw the first drop in Bank Base Rate in two years and it seems likely this downward trend will continue, as early as February. Lowering inflation, slowing manufacturing, steadying house price growth and a reduction in business confidence all point to further rate reductions in the first six months of the year. The Council of Mortgage Lenders believe variable rate mortgages will become increasingly popular in 2008 based on consumer expectations of further drops in interest rates, and this has been seen in new applications from the back end of 2007.

SWAP rates, the rate at which banks lend each other money and the basis of fixed rate mortgages have also begun to ease. In 2007 SWAP rates increased significantly due to concerns in global finance markets leading to fixed rate borrowing becoming more expensive. In early 2008 these rates have begun to reduce meaning if lenders reprice accordingly we could begin to see some cheaper fixed rates becoming available.

Tightening lending criteria is likely to see lenders placing ever greater scrutiny on the valuation process. We expect new builds in city centres to be viewed with some trepidation by lenders, and it is essential investors consider comparables in the area before accepting the developers’ valuation.

Securisation, the process many lenders use to source their mortgage funding, is also liable to change the make up of the lenders in the market. We are likely to see ‘on balance sheet’ based lenders (banks and building societies who use their own retail funds to provide mortgages) becoming more dominant. This is because ‘off balance’ sheet lenders who source finance from the money markets will find funds harder and potentially more expensive to secure. The change in the lender make up is again due to the ‘credit crunch’ and nervousness in the financial markets. This could mean in the coming year we offer you products from lenders you haven’t previously used or haven’t even heard their name. This shouldn’t concern you because we regularly meet lenders and review their lending practices and procedures to ensure our customers continue to receive the service to which they have become accustomed.

The key message for early 2008 is can your broker continue to offer the finance options you need in the current climate?

For further information on the leading Buy to Let mortgages we can offer please dial 0845 345 6788

Buy to Let mortgages – changes you need to know about

The last few months have seen some of the biggest changes to Buy to Let mortgage criteria since they were introduced in 1994. The so called ‘credit crunch’ has meant lenders are more selective about who they will lend to and the type of propositions they will lend on. There is an increasing focus on low risk quality propositions with lenders introducing criteria that filter out higher risk transactions. Lenders are increasingly seeking relationships only with those brokers who have a proven track record of delivering quality applications. The change in market dynamic will begin to highlight the calibre of brokers that landlords work with and this is something we welcome. If you haven’t been actively looking at the funding for your portfolio recently some these changes may come as a bit of a surprise. Below is a definitive guide to current changes, but be aware lenders are rolling out changes so fast the goal posts are continually moving.

Availability of mortgage products

According to March 2008 statistics from Moneyfacts the number of Buy to Let mortgages available has fallen 60% since the outset of the credit crunch. Much of the 60% can be directly attributed to the sub-prime market and the offerings from the securitised lenders. We expect to see an increasing number of investors asking for funding for certain property or tenant types, rather that asking simply for the best rates.

The Buy to Let market has for many years been dominated by securitised lenders with funds borrowed from the money markets and niche brands owned by the larger financials institutions. However, the global credit crunch has led to funding difficulties for the securitised lenders and limited funding for niche brands from their parent organisations. Many securitised mortgage lenders have as yet not been able to re-enter the marketplace as funding is sparse and too expensively priced. Meanwhile many niche brands are receiving smaller tranches of funding from their parent companies as a result of liquidity concerns.

New builds

New builds property - which many lenders also classify as properties, flats or houses built or converted in the last twelve months have been a particular cause of anxiety for Buy to Let lenders. It is increasingly common for lenders to refuse to lend on this type of property altogether. Capital Home Loans are the latest organisation to decline to lend on new builds including newly converted properties.

New builds is the one area of concern in the sector, particularly in some city centres where supply is currently outstripping demand. The fact that renovated flats and houses in the last twelve months are classed as a new build may be of surprise to many investors.

Please be aware it is still possible to fund new build Buy to Let property, but funding options are extremely limited. Almost all lenders will also be extremely suspicious of builders’ or developers’ discounts. Mortgage lenders have been paying particular attention to transactions where discounts are involved, and now scrutinise each transaction in order to gain a true market value.

Remortgaging new build property can also present problems because again the lender is trying to establish a true market value of property. Mortgage Express one of the UK’s largest Buy to Let lenders announced in February on new remortgage applications they will take the lower of either purchase price minus any discounts or open market value.

Loan to values

Some lenders are asking investors to put down larger deposits by lowering the maximum loan to value they will lend at. For example UCB Home Loans (the specialist Buy to Let lender of Nationwide) are asking borrowers to put down a 25% deposit, from the previous requirement for a 15% deposit. Meanwhile Irish Permanent has lessened their maximum loan to value to 80%, meaning there is a requirement for a 20% deposit. Mortgage Express (The UK’s largest Buy to Let lender according to Council of Mortgage Lender statistics) have also withdrawn their 90% loan to value Buy to Let range.

In the last five years Buy to Let lenders have lent at 85% loan to value, with many lending up to 90% loan to value last year. However some lenders are now introducing a maximum loan to value of 75% or 80%. The move is fairly widespread across the marketplace with some lenders making definitive moves to increase deposit requirements.

First time Buy to Let investors

First time Buy to Let investors are also likely to find their mortgage options decreasing. The Mortgage Works will no longer be lending to first time landlords, a stance also taken by UCB Home Loans. It remains to be seen if these changes will become the market ‘norm’ and if other lenders will follow suit.

Products available for a shorter time

Lenders are increasingly withdrawing products with little or no warning due to concern about lending beyond their available funds. Competitive products have a very short shelf life in the current market and we would urge investors to act fast to secure funding otherwise you’ll be disappointed.

The changes in Buy to Let mortgage criteria cannot solely be attributed to lender worries about the credit crunch and the need to ensure loans are as prime as possible. The credit crunch has meant fewer organisations are lending because securitised lenders are having difficulties securing funds at a rate competitive enough to re-enter the market. This means the lenders remaining are receiving a much higher number of applications and as result have been lending in elevated volumes. These measures may partly be being used as a short term mechanism to lessen the volume of applications lenders are receiving, allowing them to achieve smaller lending volumes they are more comfortable with. However many of the criteria are likely to remain and mortgage criteria are now aligned to the product offering we were seeing five years ago. The overriding considerations for Buy to Let lenders in the remainder of 2008 will be ‘quality’ and ‘low risk’ applications.

The key considerations for investors will be does your broker still have access to sufficient funding to satisfy your investment needs?

To discuss your Buy to Let mortgage needs in light of current market conditions please call 0845 345 6788

BUY TO LET MORTGAGE MARKET SEES FURTHER CRITERIA CHANGES

Renovated properties and deposit size are affected

Mortgages for Business, the specialist buy-to-let mortgage broker, is reporting a number of new criteria changes amongst the UK’s buy-to-let lenders which will affect funding for newly renovated properties classed as ‘new build’s and also the deposit size now required for most loans.

New builds which many lenders also classify as properties, flats or houses built or converted in the last twelve months have been a particular cause of anxiety for buy to let lenders, and it is increasingly common for lenders to refuse to lend on this type of property altogether. Capital Home Loans are the latest organisation to decline to lend on new builds including newly converted properties.

Jonathan Moore, head of Marketing at Mortgages for Business comments: “New builds is the one area of concern in the sector, particularly in some city centres where supply is currently outstripping demand. It is essential however not to judge the whole buy to let investment proposition on the performance of new builds. Established properties and particularly HMOs and flats above commercial properties provide good long term yields. The fact that renovated flats and houses in the last twelve months are classed as a new build may be of surprise to many investors”.

The second major change is the size of deposit required. Some lenders are now asking investors to put down larger deposits by lowering the maximum loan to value they will lend at. For example UCB Home Loans (the specialist buy to let lender of Nationwide) is asking borrowers to put down a 25% deposit, from the previous requirement for a 15% deposit. Meanwhile Irish Permanent has lowered their maximum loan to value to 80%, meaning there is a requirement for a 20% deposit. Mortgage Express (The UK’s largest buy to let lender according to Council of Mortgage Lender statistics) have also withdrawn their 90% loan to value buy to let products.

Jonathan Moore continues: “In the last five years buy to let lenders have lent at 85% loan to value, with many lending up to 90% loan to value last year. However some lenders are now introducing a maximum loan to value of 75% or 80%. The move is not widespread across the marketplace as yet but some lenders are making definitive moves to increase deposit requirements”.

First time buy to let investors are also likely to find their mortgage options decreasing. The Mortgage Works will no longer be lending to first time landlords, a stance also taken by UCB Home Loans.

It remains to be seen if these changes will become the market norm and if other lenders will follow suit.

Jonathan Moore continues: “The changes cannot solely be attributed to lender worries about the credit crunch and the need to ensure loans are as prime as possible. The credit crunch has meant fewer organisations are lending because securitised lenders are having difficulties securing funds at a competitive enough rate to re-enter the market. This means the lenders remaining are receiving a higher number of applications and as result have been lending in elevated volumes. We view these measures as a short term mechanism to lessen the volume of applications there are receiving, allowing them to achieve lending volumes they are more comfortable with”.

-Ends-

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739

Inside Track close buy-to-let seminar programme

Mortgages for Business says this should not be misinterpreted as wider buy-to-let market concerns

Inside Track has axed its buy-to-let property seminars in the wake of sliding house prices and tight lending conditions for new-build flats.

Mortgages for Business, the leading specialist buy-to-let mortgage broker, says that Inside Track’s exit from its property seminars should not be taken as a barometer of the health of the buy-to-let market.

Inside Track and its sister companies have promoted investment in city centre new build developments. These city centre new builds is the one area of the market where there has been a significant downturn, but this is not a new phenomenon. Many of the UK’s city centres have seen a glut of this type of property released without the anticipated demand. As a result prices and rental values have now dropped.

Lenders have over the past 18 months recognised this and tightened up their lending criteria or removed themselves completely from such classes of properties.

Jonathan Moore, Head of Marketing at Mortgages for Business, said: “Mortgage lenders have been paying particular attention at transactions where discounts are involved, and now scrutinise each transaction in order to gain a true market value.

“Solid properties such as student HMOs or terraced houses tenanted to young professionals remain a sound investment.”

The buy-to-let market is dominated by established portfolio investors. According to CML statistics the large portfolio landlord remains dominant with 13% of landlords owning 74% of the buy-to-let stock, and more strikingly, 53% of landlords own a mere 3% of the stock.

“Investors who choose to part with large sums of money investing in property they haven’t seen, in areas they do not know, and through third parties are likely to experience problems. You wouldn’t purchase shares or invest in a business without first doing some background research – it is the same with buy-to-let. We have always advocated the best research any investor can do is their own research rather relying on prepackaged solutions,” adds Moore.

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

Buy-to-let doom and gloom – don’t believe all that you hear, says Mortgages for Business

Buy-to-let investments have been very much in the media spotlight in recent weeks, with The Money Programme (October 2007) and Panorama (February 2008) both painting a rather gloomy picture, highlighting the plight of investors who have lost hundreds of thousands of pounds following falling house prices.

Mortgages for Business, the leading UK specialist buy-to-let mortgage broker, responds to these reports, calling them misleading, deceptive and misrepresentative of an investment vehicle that, when judged across the country and across different property types, is in good health.

Much of the negativity surrounding buy-to-let seems to focus on the new build sector in city centres, and the over supply of properties, particularly flats and apartments, in areas such as Leeds.

Jonathan Moore, head of marketing at Mortgages for Business, said: “It is true that the demand for such properties has fallen and with it their value and the rental incomes. But to judge the entire buy-to-let market on one class of property is wrong, and to suggest that this is indicative of the entire buy-to-let market is just misleading.

“Much of the negative hype tends to neglect better performing categories of property which enjoy higher yields, such as HMOs (houses in multiple occupancy), and also fails to address areas around our cities where house prices are rising due to city centre affordability issues.”

Buy-to-let investors should also think carefully before making their investment warns Moore. “Investors who choose to part with large sums of money investing in property they haven’t seen, in areas they do not know, and through third parties are likely to experience problems. You wouldn’t purchase shares or invest in a business without first doing some background research – it is the same with buy-to-let.”

“Successful investors are those who have a good understanding of a local property market, who get comparable rents and valuations. The best research is almost always your own,” adds Moore. “Combine this with research from Paragon Mortgages published at the beginning of this month showing an increase in rents of 19% in 2007, savvy investors have plenty of reasons to feel upbeat.”

Much attention has also surrounded property valuations on new builds, where builders’ discounts appear not to have been taken into account in the mortgage valuation. “Quite simply, if the valuer is aware of these discounts and ignores them he is breaking the law and mortgage fraud is being committed,” says Moore. “And the penalties for mortgage fraud are severe.”

The buy-to-let mortgage industry has responded to concerns around new build valuations as far back as 2006. This has been further reinforced by Mortgage Express (the UK’s largest buy-to-let lender) who in early February 2008 stated that future remortgage offers on new builds will be based on the lower of either the purchase price less discount or valuation.

Moore adds: “Would it be fair to judge the performance of shares in financial service companies using Northern Rock as a gauge? Why then judge buy-to-let solely on city centre new builds and by transactions where allegedly shady dealings have taken place.”

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

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Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739

Will 15 year fixed rate btl mortgage change investors strategies?

Mortgages for Business, the leading UK specialist buy-to-let mortgage broker, is offering a new 15 year fixed rate portable buy-to-let mortgage.

This new mortgage product marks a shift by lenders in recognition that buy-to-let market conditions are changing, with the market now dominated by portfolio investors who, according to Association of Residential Letting Agents (ARLA), have no intention of selling their property for at least 17 years.

Previously the maximum term available for a fixed rate buy-to-let mortgage was 10 years. The 5.99 per cent 15 year product has been launched by specialist lender The Mortgage Works, and is offered through Mortgages for Business.

Jonathan Moore, head of marketing at Mortgages for Business, said: “This mortgage is rather clever as it is portable. This means that it can be moved between properties should an investor decide to sell and buy a new property.”

Mortgages for Business expects that the mortgage product will suit cash-rich or inactive investors who choose not to regularly remortgage properties in their portfolio in order to raise capital to fund further purchases. Remortgaging is the cornerstone of a portfolio building strategy allowing investors to release equity from capital appreciation to invest in further properties

“We applaud the idea behind this new mortgage product and we expect it to be attractive to some investors,” says Moore. “Lenders are responding to changing conditions by developing new and innovative products that appeal to different, and often smaller, market segments. However we would expect that the large majority of investors will continue to favour fixed rates of three years or less.”

Long-term fixed rates have been widely supported by the government in the residential mortgage sector. However they have remained unpopular with borrowers who find it difficult to judge value over such a long period. Long-term fixes can also be constraining because they do not allow for changes in personal circumstance or, in the case of buy-to-let, landlords’ changes in investment ambition.

“From our experience most investors do not wish to fix beyond three year because it is almost impossible to predict what will happen to SWAP (the basis of fixed rates) and money markets much beyond this horizon. However there is certainly a niche market for this groundbreaking product” adds Moore.

For more information call Mortgages for Business on 0845 345 6788 or visit www.mortgagesforbusiness.co.uk

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Notes

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors. Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Contact

Jonathan Moore, Head of Marketing

Mortgages for Business

Tel: 01732 471600 / 07810 717421

Matt Baldwin, Coast Communications

Tel: 01233 503200 / 07930 439739