Posted on 9 December 2014
So as we make the annual expedition to the loft to crawl around searching for those elusive baubles, and dust off the Christmas tree, for the impending (and seemingly ever earlier festive season) it’s time to look at another eventful month in the mortgage market. As Christmas lights up and down the country are being switched on by numerous celebrities, and retailers are bracing themselves for the inevitable surge in ‘happy’ shoppers filling their stores eager to part with their hard earned cash, both residential and buy to let rates continue to stay low, with some real ‘crackers’ to be had. However, there’s no sign of any of the significant loosening of criteria that’s needed to see lending levels pick up.
The bank rate rise that earlier this year was anticipated by many analysts and economists is now looking like at least the latter half of 2015, and maybe even early 2016 due to recent poor news in the papers, while the housing market continues to show signs of cooling with the main surveys from Halifax, Nationwide and Land Registry all registering slowdowns. It certainly looks like the urgency from buyers desperate to buy at any cost has dissipated, and been replaced by a more cautious “wait and see” approach by many would be first time buyers and home movers.
In the buy to let (BTL) market there are two areas worth looking at in a bit more detail. There’s been a quiet change in attitude to products during the past couple of years, which has been more noticeable this year as landlords look to longer term payment security. The last few months has seen the increased popularity of five year fixed rates continue, with almost 25% of our clients now eschewing the short term deals and instead opting for a longer term fixed rate. Whilst property prices were soaring landlords were able to buy property on a two year rate and then at the end of the period be able to re-mortgage and strip out the accrued equity to fund further projects. Whilst two year products do remain exceptionally popular, the impending regulation of the BTL sector, plus the cooling of the property market, means that the attractiveness of longer term deals offering payment security has increased sharply again this year.
The other factor affecting BTL product choice has been the move from some lenders to increase the notional rate they use to calculate the rental cover. Typically most lenders were using 125% of a notional 5% rate, however earlier this year Woolwich increased this to 125% @ 5.79% and just last month The Mortgage Works increased their rental assessment for loans between 65% to 75% to 125% @ 5.49%. So for example a 75% £200,000 buy to let loan that previously would have needed rent of £1,040pcm, but now needs £1,143pcm to meet the new criteria. If more lenders follow this it will undoubtedly have an impact on the BTL sector, and how much landlords will be able to borrow.
A recently published survey by Bank Of Ireland, has highlighted that across the country as a whole, some 29% of next year’s retirees, will be looking to invest in BTL property to boost their retirement income, and this figure rockets to 47% in London. BTL is therefore likely to become the focus of far more market activity in 2015 year as the new rules allowing retirees to use their pension pots for things other than the purchase of an annuity come into force.
So as the great day approaches, it only leaves us to wish you and your loved ones, a very Merry Christmas and happy New Year. We’ll see you next year in 2015.
If you’re considering buy to let or looking to re-mortgage, call our team to discuss your options:
0844 346 3672
This article is for information only and does not constitute advice. Please obtain professional advice before taking out a mortgage. Your property may be repossessed if you do not keep up repayments on your mortgage, or any debt secured on it.
All information is correct at date of publication.
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