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Thursday, 02 April 2009 11:58 |
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 Shock horror!
There’s been two bits of good news all in one week. The Nationwide Price Index reported an average house price rise of 0.9% AND mortgage approvals rose to their highest since May 2008. Maybe it's because the sun is out and people have come out of hibernation – whatever the reason, there is definitely a feeling that most of the bad news has gone and that we are starting to ‘bottom out’ (I’m touching wood as we speak). Because mortgage approvals happen ahead of property transactions, these figures
will help to uphold the belief that the bottom of the property market is fast approaching…or maybe behind us…The buy to let mortgage market is still quite subdued but I would say there are again small signs of increased lending appetite. There was the news that last week that a major buy to let lender was increasing their daily lending from £12m to £24m. We have also seen Natwest come back into the 75% LTV buy to let market with an interesting remortgage product. Buy to Let trackers have all but dried up and with the knowledge that interest rates are unlikely to go any lower (well lets face it they cant go much lower and even if it dropped to 0.00% it wouldnt have much impact) the talk is now turning to fixed rates. Ticking time bomb? The next phase of the mortgage market is going to have to be played carefully by landlords to make sure they balance the short term with the medium term. What do I mean by this? Well, currently alot of landlords are doing very well out of the recent interest rate cuts and cash flow is fantastic but many of them are in negative equity (and even if it's not negative equity, their loan to value has increased to over 75% loan to value). This means they can't really look to remortgage away from their current lender. As it's not a problem at the moment for many, it hasn't become an issue yet - but should rates start to rise (and rise they will, for this will mean the economy is turning) then many investors may be trapped with their current deals and should rates increase significantly then it will start to hurt. So, what solutions are there? Well if you dont have any equity or cash to pay into some of your mortgages you need to be ready to accept your going to be with your lender for a long time, and whilst rates are low build up a reserve fund for when the inevitable happens. To quote a politician - "Fix the roof whilst the sun is shining". Which it is, for the moment. |