Base rate decrease to 1.5%

Buy-to-let landlords have a long-term view

The mortgage market needs to be kick-started

£100m regen in Leicester

£18m deal to provide affordable housing

Base rate decrease to 1.5%

The Bank of England (BoE) recently cut the base rate by 0.5% to 1.5%. Property experts welcomed the cut but the question remains as to how this will encourage banks to increase the availability of finance to either households or businesses.

Simon Rubinsohn, the Royal Institute of Chartered Surveyors’ (RICS) chief economist said: “ Indeed, the risk is that lenders are set to become even more restrictive over the coming months in the face of the worsening economic climate. With many first time-time buyers unable to find the finance to take an initial step onto the housing ladder and existing owner-occupiers needing to move similarly blighted, the time has come for the Government to take direct action to restore an orderly property market.”

The gap between new buyer enquiries and the number of mortgage approvals is increasing. New buyer enquiries, according to the latest RICS housing market survey, were at their best level since October 2006, whilst the BoE’s mortgage approvals data in the same month sank to its lowest point on record.

Rubinsohn believes that guarantees for the new issuance of residential mortgage-backed securities (RMBS) as recommended by Sir James Crosby needs to be adopted as soon as possible. By removing the risk associated with wholesale lending through securitisation vehicles, Government guarantees should inject some much-needed confidence back into the RMBS market. The RICS also think that incidences of negative equity and the level of home repossessions will increase if potential homebuyers continue to be frozen out of the market. RICS believes that a further period of sustained weakness in the housing market could deliver a further blow to consumer confidence and, in the process, lead to a deeper recession in the economy than might otherwise have been the case.

Michael Coogan, director general of the Council of Mortgage Lenders (CML), said: “This cut is a double-edged sword for retail-based lenders. While lower mortgage rates provide borrowers with the opportunity to repay their mortgage debt more quickly to reduce the term, lower savings rates impact lenders’ ability to attract deposits and maintain the flow of mortgage lending in 2009.

Buy-to-let landlords have a long-term view

Buy-to-let landlords continue to have a long view over their property investments, according to the Association of Residential Lettings Agents’ (ARLA) latest quarterly ARLA Review and Index, as landlords expect to hold them for up to 20 years and, even if house prices continue to fall, they do not intend to sell.

ARLA believes that it is these investors who are maintaining the core growth in the private rented sector and providing the housing solutions for people during the recession. The proportion of investment landlords who do not expect to sell during the next 12 months has risen sharply from 77% to 88% and the annual life expectancy of residential property investments averages at 16.3 years with more than one in five investors expecting to maintain their investments for over 20 years.

These investors reported an average loan-to-value (LTV) ratio across their portfolios of 56%. Only a third estimated their LTV at more than 76%. The average rate of return on buy-to-let investment over the past five years is 10.59% for an outright cash purchase and 21.54% for a mortgage-backed investment.

Ian Potter, head of operations for ARLA, said: “Again and again, these independent surveys show that buy-to-let landlords are helping to guarantee the growth of the private rented sector and these are the people who provide the housing solutions for those hit by the current recession and into the future.”

The mortgage market needs to be kick-started

Alistair Darling is set to back a £100bn gamble with taxpayers’ cash in a bid to kick-start the mortgage market by effectively underwriting the majority of new mortgages in the UK to encourage big investors to give money to lending banks.

The proposed scheme means the UK Government would guarantee mortgage bonds, where banks parcel up individual home loans and sell them to investment firms. When the system works properly, banks have a source of money to loan to customers and investors get a return.

But with many investors currently reluctant to risk their money on mortgages, Darling is preparing to guarantee the value of mortgage bonds to get the cash flowing again. The total value of new mortgages involved has been estimated as up to £100bn, leading to claims that the scheme poses too many risks to taxpayers while offering too few rewards. And the new measures, coming on top of a £500bn scheme to guarantee banks’ borrowing and the £12bn cut in VAT announced in October, will raise further fears over the extent of the Government’s spending in the face of the credit crunch.

£100m regen in Leicester

Plans for a £100m regeneration of the area around Leicester Tigers Rugby Club, Leicester, have been submitted by the Frank Whittle Partnership.

Under the plans, the land around Leicester Tigers’ stadium will be transformed with a four-star hotel, multi-storey car park and major office development. The scheme also includes a new building for Leicester’s hospitals and accommodation for students in the city. Leicester Tigers say the new plans complement the £30m redevelopment of its Welford Road ground which is well underway.

David Robinson, Frank Whittle Partnership managing partner, said: “We are extremely pleased to be involved with one of the top rugby union clubs in Europe on what is now a major regeneration project for Leicester and to be playing a key role in driving that vision forward.”

At least two major hotel groups are vying to build a 141-room luxury hotel on site. Other proposals include a grand plaza linking the hotel with the Tigers stadium. The council will make a decision on the Tigers’ application in the next 13 weeks.

£18m deal to provide affordable housing

PIN’s latest mortgage recap