Lending to continue to tighten over next three months
According to the Bank of England’s (BoE) Credit Conditions Suvery for Q2 2008, lenders believe that the availability of mortgage finance will continue to tighten over the next three months.
The survey found that the availability of secured credit for households had reduced in Q2, with lenders reporting that expectations of further falls in house prices had been a contributing factor. With house prices still falling and the expectation that this will continue, lenders expect there to be a further tightening of secured credit in the next three months. When reporting back about demand, lenders found that the fall in demand for secured credit had declined beyond their expectations and that they expected this to continue into the next quarter. The number of people defaulting on their mortgage repayments also increased beyond expectation and again lenders believe that this is set to increase further through the next quarter.
Neil Johnson, spokesman for the Building Societies Association (BSA), told PIN: “With the prospects for the housing market remaining poor, it is no surprise that lenders are taking a cautious approach to future business levels. However, despite this, the record performance of building societies in the savings market means that they are open for business and are able to lend to borrowers who meet their criteria.”
‘Window of opportunity’ in current market
Jones Lang LaSalle (JLL) believe that the current property market is presenting investors with a ‘window of opportunity’ to buy low priced properties.
The company said there is no doubt that the country is in for a tough time over the coming 18 months but there are also reasons to be optimistic when it comes to viewing the market in the medium to long-term. It expects house prices to rise sharply in 2010 as demand once again overtakes supply.
Neil Chegwidden, head of residential research with JLL, believes house price growth will accelerate to over 10% per annum in 2010 as the market corrects what he believes will be an ‘undershoot’ in the coming 18 months. Once balance has been restored to the market Chegwidden believes growth will steady at 6% in the medium to long-term. If finance is not a problem JLL sees the current market as a good opportunity to take advantage of low prices.
Not all analysts are as confident as Chegwidden. Kelvin Davison, property economist with Capital Economics, told PIN: “Our forecast is down 15% for 2008 followed by 10-12% falls in 2009 and 2010. In our opinion, 2010 will be the bottom of the market. We do not share the view that now is a good time to invest as there are more falls still to come. Property is not going to fall forever. The market is ridding itself of the excess of recent years and it will then begin to return to normal. When growth returns, we expect it to be much closer to that experienced by income.”
Nationwide focus on existing customers
Nationwide Building Society has told PIN that it is not currently lending to new customers for new commercial property.
Enda Joyce, spokesman for commercial business at Nationwide, said: “Nationwide is currently taking a more cautious approach to the market, our primary focus are our existing customers. This is our position in the short-term, but we intend to review this on a regular basis and react to current market conditions.” Nationwide is one of the top five commercial property lenders in the country and currently claim to have over £20bn of loans on its books.
In May, De Monfort University found that willingness to offer commercial loans was at a 10-year low as a third of respondents to its survey said that they were less willing to do this. Joyce believes that the number is now lower than this as most lenders are tightening their lending criteria or putting new lending on hold altogether. Joyce added “There is currently not much lending from any other banks at the moment.”
Protocols for national regeneration agency laid out
New protocols for the Homes and Communities Agency (HCA) have been announced by the Department of Communities and Local Government (DCLG) to help with the supply of new homes and the regeneration of deprived communities.
When the HCA was originally announced, fears had been raised at a local government level that regeneration projects and planning would be dictated from central Government. The DCLG hopes to alleviate some of those fears with the announcement of the HCA’s protocols. The agreement between the HCA and local government includes a number of key areas in which the HCA will support local regeneration. These include helping bring forward land for development, helping to unlock strategic land assets, coordinating land development with public sector agencies and to facilitate discussions between councils on housing delivery.
The HCA is due to begin operating in April 2009. Its remit will be to bridge the gap between national housing targets and local priorities by offering a ‘clear and consistent approach to the allocation of funding’ thereby helping councils to develop proposals for funding in an informed way.
John Slaughter, director of external affairs for the Home Builders Federation (HBF), told PIN: “This is a welcome initiative which we hope will focus public bodies, including the new agency, on facilitating investment from the private sector and supporting the home building industry as it strives to deliver the housing this country needs.”
City Lofts goes into administration
City Lofts Group, the holding company of City Lofts Developments (CLD), has been put into administration.
City Lofts Group was formed in 1996 and focused its developments on inner city living especially within northern cities. Over the last year many cities, especially those in the north-west, have suffered from an oversupply of inner city apartments with further developments still to come on to the market. Developers who were once able to sell many of their apartments off-plan have recently been faced with an increasing number of unsold apartments on their books. These developers have found their core market of first time buyers being unable to enter the property market and buy-to-let investors steering clear of the large number of unlet apartments.
Recently CLD had put 250 of its unsold properties into receivership and in a statement said ‘This is part of a restructuring process which City Lofts has been pursuing in light of the extremely difficult market condition’.
The British Property Federation (BPF) believes that Government reforms could go some way to alleviating the current crisis facing developers. Andrew Teacher, spokesman for the BPF, told PIN: “It is indicative of the current financial climate and it could well be a while before development resumes. The Government is staunchly sticking to its 3 million house building target, but needs to accept that affordability is driven by a person’s income, not by the volume of properties built. The BPF has set out a raft of measures which could help the situation. These include reforms to planning and to the way stamp duty is charged and do not require any new legislation.”
Base rate held at 5%
The Bank of England (BoE) has announced that it will be holding the base rate at 5% for the coming month.
This is the third consecutive month that the base rate has been held at 5%. A cut in the base rate had always been doubtful, especially with inflation hitting 3.3% in June. As the economy slows and inflation continues to rise, the prospect of a cut in the coming months is becoming increasingly unlikely. This news is unlikely to offer homeowners any respite as they continue to struggle with higher mortgage and living costs.
Neil Chegwidden, head of residential research at Jones Lang LaSalle, said: “We are unsurprised that the Monetary Policy Committee (MPC) has kept the base rate on hold at 5% today. Faced with the rarity of considering a cut, a rise and a hold, the sensible and balanced action was always going to be to hold. However, decision making may become more difficult for the MPC in the coming months as both inflation worries and economic deterioration escalate. Whatever the decision today it was never going to have a notable positive impact on a housing market which is suffering under weak turnover, a steady fall in prices and a torrent of poor housebuilder news.”
Lending increases in May
The latest figures from the Council of Mortgage Lenders (CML) found that the volume of lending for house purchases increased in May to 52,700 from 51,000 in April (+3.3%). There was also an increase in the value of loans to £7.9bn from £7.7bn in April (+2.6%).
The results found that lending to first-time buyers also increased by +3.8% to 19,200 in May. In addition, loans to home movers increased in May by +3.7% to 33,500. After a sharp increase in the number of remortgages in April to 83,000, there was an even greater fall in May to 71,000 (-14%).
The picture is much bleaker on an annual basis with all areas suffering substantial falls from May 2007: volume and value of loans for house purchases (-44%), first time buyer loans (-41%), home mover loans (-46%) and remortgage loans (-23%).
The CML figures also recorded the type of loan purchased. Although fixed-rates have become more expensive over recent months the percentage of these loans taken out has increased to 66% of all new loans in May from 59% in April.
Jeremy Law, head of buy-to-let at Mortgage Express, told PIN: “It is important to remember that these figures are for completions and that the transactions will have been agreed several months earlier which might explain the slight increase. We have found that there is still demand for buy-to-let mortgages and that the experienced landlord is still confident. They see the current housing market as a good opportunity to buy. Landlords are taking out more fixed rate mortgages than we expected as certainty regarding payments becomes more important than the extra cost.”
Mayor plans for a better London
Boris Johnson, Mayor of London, has recently published ‘Planning a better London’ which sets out his intentions to revise the city’s statutory planning document, the London Plan, and to abolish the 50% affordable housing target.
The key feature of the report is a proposal to change the previous mayor’s affordable housing target of 50%. Johnson plans to completely abolish the idea of a percentage target and instead focus the supply of affordable housing on the provision of 50,000 homes over the next three years. He proposes that the total target will then be broken down on a borough by borough basis with each borough negotiating an achievable target with the Mayor.
It is hoped that further changes to the Capital’s planning system will help to improve the quality of life for Londoners. The report sets out the mayor’s belief that there needs to be stronger policies which ensure that new developments are better designed to cut down on crime and anti-social behaviour.
Johnson said: “I want to see a slimmer London Plan, which deals with genuinely strategic issues, but this won’t be at the expense of London’s need for more homes and economic success. In future, both inner and outer London will be equal priorities, and I’ll be working more collaboratively with local boroughs, especially to see that we get the 50,000 affordable homes we need to build over the next three years.”
Empty building tax ‘unfair’ in current market
The empty buildings tax runs the risk of becoming an unfair tax according to Andrew Warde, rating consultancy director with NB Real Estate.
The tax was brought in to try and curb the number of landlords who were letting commercial properties stand empty while property prices were increasing. The tax was announced last summer but was not brought in to effect until April 2008. In the intervening months the commercial property market has begun to feel the affects of the downturn in the economy. In a recent survey NB Real Estate projected that since coming in to force there has been a 15% increase in the numbers of vacant properties.
Warde told PIN: “The Government should accept its responsibility to take steps that avoid rates becoming an unfair tax. Vacancies can happen to any property, not necessarily because it is unfit for purpose. For a property investor to lose income in the present market causes difficulty enough, but the position is now being made more serious by inflexibly applied rates costs.
“The Government is counting on ratepayers and their pressure groups having difficulty in putting together specific evidence that paints a picture of the difficulties being caused. Property owners are becoming trapped over liability for rates on some buildings that cannot be let in the present market on the one hand and on the other have become unsellable due to the rate costs.”
Plans submitted for £150m regeneration project in Lancaster
Centros has submitted a planning application for a £150m mixed-use development in Lancaster.
The Canal Corridor North development plans to extend and rejuvenate Lancaster city centre. The focus of the development will be 40 new shops, cafes and restaurants covering 499,000 sq ft of retail space. This will include a 97,500 sq ft Debenhams store and the development hopes to promote local retailers as well by providing smaller retail spaces. Centros has included 179 homes in its plan for Canal Corridor North of which 25% will be affordable.
The development will also include an 800 space multi-level car park, a new premises for Lancaster’s Musicians Co-operative, improvements to the Grand Theatre and a £3m investment in improving the surrounding road network. If plans are approved later this year the development is set to complete in 2012. Centros hopes that the development will be a catalyst for further development in the city and that existing city centre businesses will also benefit from an increased numbers of shoppers.
Mortgage News
In PIN’s latest weekly mortgage recap, Tim Warburton reports…
HSBC claims to have launched the country’s only sub 5% discount mortgage. The two-year product has an interest rate of 4.99%, an 80% loan-to-value (LTV) and a £2,499 arrangement fee. The deal has a borrowing limit of £250,000. For those needing to borrow up to £500,000 the rates are 5.49% and 5.79% with arrangement fees of £999 and £249 respectively.
Alliance and Leicester (A&L) has launched a new two-year tracker with an initial rate of 5.98%, which has a 75% LTV and a £999 arrangement fee.
Astra Mortgages has launched a lifetime tracker through broker John Charcol. The product has an initial rate of 6.19%, with an 85% LTV and a £799 arrangement fee.
The Mortgage Alliance has launched a three-year fixed-rate remortgage funded by Abbey. The deal has a rate of 6.39%, with a 60% LTV and a £999 arrangement fee. It also has a loan limit of £550,000.
Abbey has launched a ten-year fixed-rate at 6.24% that has a 75% LTV with a £999 arrangement fee. Abbey said that this is in response to increased demand for longer fixed-rate deals.
Mortgages for Business has launched a two-year discounted buy-to-let mortgage. The deal has an initial variable rate of 5.39%, with a 70% LTV up to a maximum of £350,000, a 3% arrangement fee and a 120% rental cover.
Cheltenham and Gloucester (C&G) has launched a new seven-year fixed-rate with a £995 arrangement fee, it is available for 6.29% and 6.59% for those borrowers with a 75% and 90% LTV respectively. Fee free versions are also available.
C&G has also reduced the rates on a number of its productsby up to 0.06%. A two-year fixed-rate with a 90% LTV is available for 6.79% with a £495 arrangement fee. The five-year equivalent is available for 6.99% and a two-year tracker with a 90% LTV is available for an initial rate of 6.49%.
