Landlords look to expand their portfolio in the first quarter of 2010

Beware squatters or face large legal bills

Mortgage arrears down -27%

House prices rise 273% in last 50 years

Businesses improve payment times

Research by Paragon Mortgages’ Trends has revealed that 10% of landlords are looking to expand their portfolio in the first three months of 2010, but are still restricted by the lack of suitable mortgage finance.

Terraced housing is the most popular choice of property with 65% of those surveyed stating that would be their preference, followed by semi-detached houses at 25%, 20% are looking at flats and just 10% detached property.

John Heron, Paragon Mortgages’ managing director, said: “It is encouraging that landlords are still active in the market and are looking to expand their portfolios. With tenant demand at such strong levels and soft house prices presenting the opportunity for bargains, it is easy to see why. But investors continue to be frustrated by a lack of choice and competition in the buy-to-let mortgage market, which is dominated by just two lenders. Landlords have told us that it was more difficult to source mortgage finance in the fourth quarter than in the third, and we see nothing to suggest that the situation will improve quickly.”

According to the survey, landlords found it was more difficult to secure mortgage finance during the fourth quarter than in the three months previously. Of those that did apply for a mortgage to expand their portfolio or for remortgaging purposes, 67% stated it was harder to secure a mortgage in Q4 2009 than Q3, with 26% stating there was no difference, whilst 7% said they found it easier to secure mortgage finance between the two quarters.

Beware squatters or face large legal bills

Aviva has warned property owners that they risk incurring large legal bills if they do not have adequate cover to deal with legal bills as a result of squatters occupying their premises.

Mike Colmans, underwriting manager for Aviva, said: “It is estimated that there could be as many as 20,000 squatters in the UK. Although squatting is more prevalent in domestic properties, landlords and commercial property owners with empty buildings are equally at risk. 

“It is imperative that adequate measures are put in place to prevent squatters from entering and taking ownership, as it can be notoriously difficult to remove squatters. Landlords obtaining interim possession orders (IPO) from the courts to remove squatters can take time as well as being significantly costly. In addition, by the time an IPO has been issued, squatters might have already moved on.”

Colmans highlights a particular case, when an insured purchased a new site for development as a new outlet, but before building work could commence squatters occupied the site. A court order was obtained to remove the squatters, but when they refused to leave, a warrant of possession was obtained and a bailiff had to attend the eviction. The legal bill was in excess of £5,500.

Mortgage arrears down -27%

CHL Mortgages has revealed that there have been significant improvements in both early and late arrears on its entire buy-to-let and home-loan mortgage book.

Its figures from December 2009 show that they have seen a -27% decrease in early arrears (less than three months) and a -31% decrease in late arrears (over three months) since their peak of February 2009.

Bob Young, CHL Mortgages managing director , said: “We have even seen a continuation of our arrears numbers continuing to drop over the recent Christmas period which is further good news, particularly at a time when you might expect some borrowers to use their mortgage payment money for other expenses. This appears not to have been the case and, if the economic recovery does not run out of steam, we expect CHL’s overall arrears to reduce by -15-20% in 2010, leaving us in good shape to capitalise on future opportunities.”

CHL predicts that the trend will continue for the foreseeable future with all indicators pointing towards arrears reducing back to 2008 levels over the summer.

House prices rise 273% in last 50 years

Since 1959 the average price of a residential property in the UK has increased by +273% to £162,085 from a mere £2,507, with prices rising an incredible +62% in the nine years since 2000 according to Halifax.

The worst performing decade was the 1990’s where property prices fell -22%.

Halifax discovered that there have been four distinct periods of rapid real house price growth, which were 1971-73, 1977-80, 1985-89 and 1998-2007 with each period followed by a significant fall in real house prices.

Martin Ellis, Halifax housing economist, said: ‘The last 50 years have witnessed remarkable developments, with substantial changes in the both the number of households and their composition.’

The North/South house price divide has become more apparent since 1969 as prices in the South have increased more quickly. The average percentage difference between the highest and lowest priced UK region has increased from 84% in 1959 to 104% in 2009.

Owner-occupation rates have also increased since 1959, having gone up +25% from 43% in 1961 to 68% in 2008, particularly following the introduction of the ‘Right to Buy’ scheme. Due to this increase the proportion of homes which were privately rented fell from 33% in 1961 to 14% in 2008.

However there has been a more recent rise in the private rented sector as indicated by the rise in the number of buy-to-let property investors, which have gone up from 9% in 1991 to 14% in 2008.

Businesses improve payment times

According to Experian’s Late Payment Index, at the end of 2009 UK businesses had improved the time it takes them to pay their bills.

The average number of days it took to settle a bill went down from 23.54 days in December 2008 to 20.88 in December 2009, an improvement of two and a half days. Payment performance only started to improve in August 2009 and since then has continually reduced each month.

The UK’s largest businesses (501+ employees) saw a reduction as they went from 36.1 days late in January 2009 to 28.97 days by December 2009, which was the biggest improvement.

Joe Myers, Experian Business Information division, head of commercial credit, said: “The fact that country’s biggest businesses reduced the time it takes to settle their bills by nearly 20% is a significant turnaround. Companies are more aware now than ever that their credit score is affected by their payment behaviour. While this enables them to negotiate improved terms as well as raise credit from alternative sources or suppliers, it also means that other businesses can make a more informed decisions about working with them.”

In comparison to 2008 however payment performance in 2009 was marginally worse - from 21.51 days in 2008 to 22.79 days after agreed terms in 2009.

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