Lenders ease their buy-to-let mortgage restrictions

The housing market will cool if there’s a high turnout at the general election

Residential property in central London increases by 3.2%

Home ownership falls to it lowest level since 1991

House prices fall 1% in February

Buy-to-let mortgages appear to be slowly returning to the borrowing limits previously seen before the credit crunch, as broker London & Country is offering a mortgage with an 80% loan-to-value (LTV).

The mortgage deal is a three-year fixed rate of 6.49%, with a fee of £995 on a maximum LTV of 80% and is being funded by the Saffron Building Society. It would mean monthly repayments of £1,012 on a £150,000 repayment loan or £811pcm on an interest-only basis.

David Hollingsworth of London & Country, told PIN: ” Before the crunch hit, buy-to-let lenders had typically been advancing up to 85% of the property value and this was gradually being stretched out to 90% by some lenders. The specialist lending sector felt the force of the economic storm first and many lenders have withdrawn from the market. Those still lending in the buy-to-let market have pulled in their horns and the maximum level of borrowing has been pulled back to a maximum of 75% LTV with the better rates only available to those with even bigger deposits.  This is a similar trend as that seen in the owner occupier market where borrowers still need bigger deposits, especially to bag the best rates although if anything the restrictions are even greater in the buy-to-let market.

“However there have been some small signs of encouragement and recent weeks has brought about some improvements in lender criteria. Our exclusive deal offers a maximum LTV to those remortgaging of 80% LTV. The deal is a three-year fixed rate at 6.49% with a £995 fee.

“Other lenders including The Mortgage Works, Platform and Nottingham BS have all improved criteria or product pricing recently. However, it can’t be ignored that the market remains constrained with far fewer active lenders in the buy-to-let market, which will continue to restrict the availability of mortgage finance.“

The housing market will cool if there’s a high turnout at the general election

A good turn out in the General Election will result in a cooling of the property market, however if the Conservatives have a high number of votes, increased activity in the housing market will follow according to Your Move.

It has analysed the number of property transactions completed during periods containing a general election, going back to 1979 and discovered this phenomena.

David Newnes, managing director, Your Move, said: “Important general elections with massive turnouts tend to mean a decline in housing transactions. The more seriously the electorate takes an election the larger the scale of the disruption to the property market with tens of thousands of potential homebuyers or sellers distracted by the political process or waiting until it is over before entering the market. If the bookies are right and we see a high turnout in May, we will see a large dip in housing market activity.”

For example in 1987 there was a 75.3% turnout at the elections but transactions fell -3.4% over the three months of the election period compared to the three months before and in 1992, there was an even bigger turnout of 77.7% and transactions fell -2.4%, however in 2005 there was only a 61.4% turnout at the election which saw a +5% increase in transactions.

In 1979 the Conservative party received 13,697,923 votes, compared to 11,457,079 in October 1974 and in the three months after the election, there was an +8.6% increase in activity.

Newnes said: “Even if there’s a huge turnout and the number of property transactions falls as a result, it’s not all bad news for the housing market. If the Conservative party increases its vote, the housing market should heat up in the three months following the election.

“The increasing uncertainty of a Conservative victory is therefore potentially very bad news for the housing market. If the Tories do well in May or sooner, the bounce back should be even more pronounced than usual. With the abolition of HIPs on the agenda, as well as the promise to increase the stamp duty threshold to £250,000, many potential buyers and sellers are waiting to see if the Tories get into power.”

Residential property in central London increases by 3.2%

Central London residential property prices increased by +3.2% in February 2010, which is the highest rise in a month since August 2007 according to Knight Frank.

Prices are now only 10% below the market peak of March 2008 having risen by +19% in the past ten months.

Liam Bailey, head of residential research, Knight Frank, said: "The market recovery in London was kick-started in March 2009 by low interest rates and the weak pound which drew foreign buyers to the capital. There was a definite feeling that price falls in the year to March 2009, at -24%, had created good value in London and buyers began to bid prices higher. Foreign demand has led the market, with 45% of £2m+ purchases going to non-UK buyers over the past 12 months.

"The continuation of the growth in prices and the recent increase in the speed of such growth has been caused by a dramatic shortage of supply, with 22% fewer properties available for sale at the current time compared to normal for the time of year. At the same time demand has remained very strong with a significant influx of foreign purchasers meaning that purchaser applicant registrations is 30% higher right now than in any comparable period for the last five years.”

An increase in demand has resulted in niche developers coming back into locations such as Chelsea, Mayfair and Belgravia, after an absence of nearly 18 months. There was a +43% increase in construction starts in Kensington & Chelsea between July and December 2009, from 557 to 799 new homes.

Home ownership falls to it lowest level since 1991

Home ownership in England has fallen to its lowest level since 1991 as just 67.9% of households own their property according to a report commissioned by the Department for Communities and Local Government (DCLG) and released by the British Property Federation (BPF).

The number of owner occupied households has fallen from 14.8m in 2005-06 to 14.6m in 2008-09, whilst in the same period the number of households renting privately has gone up by one million to just over three million.

Housing in the private rented sector (PRS) has accounted for nearly all household growth over the past decade as it increased from 13.9% of households in 2008 to 14.2% in 2009.

Liz Peace, chief executive, BPF, said: "We're seeing massive demand for private rented housing in the wake of crippled mortgage markets and soaring levels of people who cannot afford to buy. The government must do something to deal with this demand or we will end up with the crisis getting far worse. The number of people living in non-decent homes shows a vital need for new investment and our view is that, with mortgages unavailable to many, this finance will have to come from institutions like pension funds who have large swathes of capital to invest. We should look at the housing models adopted in the USA and Europe where renting is socially acceptable and standards are higher because their governments have embraced professional corporate landlords."

The BPF are pushing to see a more professional rental market emerge similar to what is available to Europeans and Americans, where large rental blocks exist, much like retail parks or hotels and as a result will improve quality and choice.

House prices fall 1% in February

House prices fell 1% in February 2010 after nine consecutive months of price rises, with the decline attributed to the expiry of the stamp duty holiday and the snowy weather according to Nationwide.

Martin Gahbauer, Nationwide's, chief economist, said: “There is evidence from a range of indicators that the market may have lost momentum in early 2010 as the stamp duty holiday ended and house hunters were obstructed by the icy weather. New buyer enquiries dropped sharply in the New Year and there was also an associated drop in the number of new mortgages taken out by homebuyers in January. This drop in demand seems to have fed into agreed prices during February. At this stage, it is difficult to gauge how much of the drop in housing activity is attributable to one-off factors and therefore whether February’s fall in prices is just a temporary blip or the start of a new trend.“

The annual rate of price inflation still increased from 8.6% to 9.2% year-on-year, with the average price dropping to £161,320.

There has been an increase in borrowers taking out variable rate deals over fixed rate mortgages, with a steady increase since July 2009. The number of new loans taken out on base rate tracker or discounted variable rate deals hit a low of just 14%, but by December it had risen to 39% with the proportion of fixed rate deals decreasing from 80% to 54% over the same period.

Gahbauer, said: “It is not yet clear what has driven the steady increase in preference for variable rate deals. One possibility is that borrowers believe that base rate will remain low for longer than they did in July, making them more willing to take on interest rate risk over the course of the deal period. The relatively dovish messages coming out of recent Bank of England Inflation Reports are supportive of this explanation. Another possibility is that as house prices rose considerably over the course of 2009, new borrowers increasingly preferred to take out cheaper variable rate deals in order to keep their initial mortgage payments relatively low.“

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