With all the focus on the property prices and the related mortgages, its worth noting that the flipside of the finance for property investors, (namely the rental market) is also in a state of flux. Thats good flux, by the way. Following the property correction, we have seen a gradual decline in rental demand which has depressed prices, in turn making it tougher for the lenders rental calculations to stack up.

So it is with some good cheer that we are seeing the (gradual) reverse of this in many reports.

Ian Potter, operations manager at the landlords association (ARLA), says:

“This shift in the balance of supply and demand is extremely significant for the private rented sector. It gives further evidence to suggest that the property market as a whole is getting back on its feet.

“This shift also indicates that confidence is rising among prospective tenants; it seems that people who delayed setting up home 12 months ago now feel secure enough to proceed.

Equally, those who historically have shared a rental property seem happy to set out independently”.

Promising indeed, and this bodes well for a virtuous circle of increasing demand and extra supply that will follow, as more buy to let properties are purchased and successfully let out.

And, as if by magic, we have a new HMO product below that might just be able to help university towns and cities have seen the biggest increase.

Interest rates could be at 0.5% till 2013

A report by a chief economist from Standard Chartered bank (which basically means the report will be wrong, sorry couldn’t resist) forecast that interest rates could stay at 0.5% until 2013.

On the face of it that is great news for the property investor sitting on existing tracker rates – and it’s also better news for those of you looking to remortgage.

Lenders have been slow to reduce buy to let rates over the last few months and the margin between swap rates and fixed rates are almost at a record high. So it seems unlikely that lenders will reduce the rates on their new buy to let mortgage products much more. So for those of you looking to remortgage, for example to release further capital to invest or to pay off a lender that offers you a discount, then there is no time like the present.

Buy to let lending to increase

One of our main buy to let lenders has informally told us that they were going to increase their lending target by 50% next month. Don’t get too excited though as the credit scoring system isn’t going to change!

London Calling

Is it me or is the London property market getting excitable again? Bizarrely we had one client last week that had agreed with a new build developer a month ago a purchase price of £250,000 only to be told last week that he had measured the apartment wrong and therefore the purchase price was increasing to £290,000.
It doesn’t take long does it!

BM Solutions reduce buy to let rates

Something of a rarity these days is news that a lender has reduced their rates. And at the weekend BM Solutions did just that (What, didn’t you see our rate alert?).

The actual reason for this rate reduction is a little confusing – well it is for me anyway. BM are one of the few 75% buy to let lenders around and therefore do not need to try for market share at the moment. Dropping their rates will hardly affect their volumes (their credit scoring will make sure of that); however, it is a good sign that they are still committed to the buy to let mortgage market.

Mortgage Lending still increasing

Even more good news from the Council of Mortgage Lenders that gross lending was 26% higher in July than in June. Keep it coming.

New lenders?  Rumours emerge

Over the last couple of weeks there have been rumours in the mortgage trade press of 3 big lenders considering a return to the UK mortgage market. Kensington is one of the names being written about. Let’s hope its sooner rather than later, as we definitely need some competition in the market – although I wouldn’t expect a Kensington 90% buy to let mortgage returning quite yet! The significance of any new mainstream lender would have very positive effect on the confidence of both buyers and sellers, and crucially it could lead the way for others. Watch this space.
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Lenders undervaluing properties, claims NAEA: The National Association of Estate Agents certainly went for it yesterday when they published their report criticising lenders for deliberately undervaluing properties.

Whilst the report was very restrained when compared with the conversations I have with some estate agents, (now that would have been a more interesting report), I’m sure the sentiments and frustrations are shared.

NAEA members believe that mortgage lenders could be deliberately undervaluing properties by as much as 10 per cent causing sales and remortgages to fall through.

So here’s a snippet: “Whilst I understand that lenders are operating under severe constraints, it is neither fair nor ethical for valuations to be lowered on the basis that it might reduce exposure to competitive loan rates.”
So the two important points for us are:

1.  Down-valuations on purchases are breaking house chains and causing more drop-outs.

2.  If you are remortgaging your current property then the lender’s valuation can have a dramatic effect on what rate you are subsequently offered. For more examples, see Tip of the day below.

It looks like the stronger banks are pushing on regardless: Barclays, the parent company of Woolwich, reported pre-tax profits for the last six months of £2.98bn. Strangely, this was almost exactly the same amount that HSBC posted (isn’t that a bit weird? – two massive, complex corporate giants posting almost the same amount of profit – anyway, I digress…).

This was in sharp contrast to the poor relation, Northern Rock, who reported a loss of £724m. The interesting point about Northern Rock is that despite their losses on old loans, they are still in the market for new business – in buy to let mortgages they still have a couple of useful niches, namely:

1.  Will remortgage within 6 months (albeit on the original purchase price not valuation)

2.  Will lend on up to 4 flats on one single title.

What we need in the UK is the emergence of some semblance of competition, as is happening in the States. With the possible break up of Northern Rock mooted to be on the cards ready for a swift return to the private sector, this could pave the way for some new (or old) lenders entering the market. We can but hope.

Sale and Rent back: Following regulation last month of sale and rent back firms, the FSA are now starting to crack down on companies not complying.  There are no current buy to let lenders operating in this market anyway, (however, I’ve now heard rumours of 3 possible new entrants in the coming months); so if you do come across this situation, then make sure you either leave well alone, or probably a better option is pass it on to one of the regulated companies now offering introducer fees for this type of business (if you want a list then just email me).

The common theme this week seems to be confirmation that we have hit the bottom of the house price falls and low mortgage approvals and we are flattening.

The two main indicators are as follows:

1.         The number of mortgages approved for house purchases in June rose to 47,584 – up from 44,169 the previous month, and the highest number since April 2008.

It was the fifth month in a row that approvals have risen.

2.         House prices in England and Wales have risen month-on-month for the first time since January 2008, this time according to the official Land Registry.

The 0.1% rise in June compared with May brought the value of the average home to £153,046, the survey found.  It said that the figures revealed a “flattening” of prices, although the value of the average home was down 14% on the same month a year earlier.

I think we may bump along at the bottom for quite a few months now, although it’s interesting to see some estate agents in London are already up to their old tricks – we’ve had two deals fall through this month due to gazumping!

At the very least, it’s been a great week for bold statements from politicians.

The shadow chancellor George Osbourne has said he’s going to scrap the Financial Services Authority if the Conservatives get into power and the Lib Dem treasury spokesman, Vince Cable,  is calling for the break-up of the new Lloyds Banking Group. So no messing about then, all change next year by the sounds of it.

As you can imagine, this hardly helps to add stability to the mortgage market; after all, if you ran the Lloyds Group you’d probably be looking over your shoulder for the next 18 months whilst making your lending decisions.

However, stability is something we are starting to see (generally) in the market.

Figures show mortgage lending for house purchase was up by 28% in June on the previous three months, while mortgage approvals for house purchase were 13% up in June on the previous three months.

Oh, and did I mention 3 month LIBOR is now 0.94%, which is below one per cent for the first time since it was setup in 1986? And has this had an effect on the pricing of buy to let mortgage products? In a word,NO.