www.mortgagestrategy.co.uk ANALYSIS
Sometimes I have little
doubt why the country is in
recession and that’s
because we waste money
on civil servants who come up
with pointless ideas.
We have seen the demise of high
LTV, self-cert and buy-to-let deals
over the past year or so, so why do
we now need a White Paper saying
that’s the way forward?
OK, so we all know that some
big-wigs at the top of big banks got
profit crazy and made some big
gambles that never paid off.
Since then we have completely
rebuilt lending criteria, withdrawn
high risk products, killed off the
adverse credit market and even
gone so far as to reduce
commission payments to brokers to
ensure best advice is given.
With Treating Customers Fairly
There has been a lot of talk
about the buy-to-let
market in the last couple
of weeks.
Topics covered include buy-toletters
walking out and leaving
properties abandoned and the fact
that the number of repossessions
are sky rocketing as a result.
We could be led to believe that
demand for rental properties has
disappeared but nothing could be
further from the truth.
Leadbay has actually seen a 65%
increase in the number of
borrowers seeking advice on buyto-lets
as they look for advice of
their existing mortgages – and
some even feel that now is a good
time to start buying again.
Investors are more realistic, too,
with the average mortgage
requested now just £115,000, down
18% from the £142,000 they asked
We need action, not
government hot air
ROBERT WINFIELD
MANAGING DIRECTOR
CHARTWELL FUNDING
Still good business
in buy-to-let deals
GRANT STEVENS
MANAGING DIRECTOR
LEADBAY
the industry is in better shape than
ever and this needs to be
acknowledged as we edge out of
recession. Let’s stop wasting money
holding meetings to state the
obvious and start investing money
where we need it most.
We need government-backed
mortgage indemnity guarantees to
get the property market going
again and get people on to the
property ladder.
We also need cash to support
developers with governmentbacked
shared equity and shared
ownership and we also need
developers to feel confident that
money is available for mortgages
on new-build properties.
We need to start building again
soon or demand will outstrip
supply and the next property
bubble will be born.
for a year ago. Property prices have
fallen too, of course, but only by
12%. According to Leadbay
borrowers, the average buy-to-let
property is now worth £189,000 as
opposed to £215,000 this time last
year.
Proportionately, therefore, LTVs
have dropped by 8% with the
average just 67% now, which should
make business easier to place.
For those of you interested in
what sort of people you’ll be
dealing with – two-thirds are men,
and the average age has risen by
two years to 42.
For anyone still keen to talk to
people needing buy-to-let advice it’s
good news – the cost of acquiring
leads is now averaging less than a
fiver compared with over £10 last
year, so if you can place the
business your profit margins will
be considerably higher.
More than half the
public believe now is a
good time to buy,
according to the latest
Building Societies Association’s
Property Tracker survey.
The survey found that 54% of
people believe that to some extent
now is a good time to buy property
in the UK. This proportion has
grown consistently since June last
year when just 27% believed it was
a good time to buy property, and is a
further improvement on the 46%
who thought so in the last Property
Tracker in December.
With property prices having
fallen by more than 17% over the
past year according to the
Nationwide, it is clear that wouldbe
buyers are starting to recognise
there are bargains to be found.
The decline in interest rates has
The subject of first-time
buyers and the part they
play in the health (or
frailty) of the housing
market is a subject often discussed.
No-one would doubt that firsttime
buyers are the lifeblood of the
market and a perusal of some
recent data from the Council of
Mortgage Lenders demonstrates
how quickly things can change.
Not all the data is negative.
Interest payments as a percentage
of income have fallen from around
20% 12 months ago to slightly
under 16% in January and the
multiple of income required for the
average first-time buyer has fallen
from a little over 3.3 x to 3 x over
the same period.
Not surprisingly, the average
age and income has barely changed
with the average first-time buyer
remaining at 29 years old, typically
Economy remains
the biggest obstacle
NEIL JOHNSON
MORTGAGE POLICY ADVISER
BUILDING SOCIETIES ASSOCIATION
also seen a decrease in mortgage
costs, further encouraging people
back to the market.
But on the flip side, respondents
feel barriers to buying a home
remain. Concerns about their job
prospects is seen as the main
barrier for many. Difficulties in
securing a big enough mortgage
and problems saving for a deposit
are also major hurdles.
So although the survey shows
increasing numbers of people are
interested in buying a property, it is
clear the declining economic
situation and funding issues are
viewed by potential buyers as the
biggest hindrance.
Until economic confidence
improves and the supply of
mortgage funding increases, it is
hard to see any change, and buyers
will remain reluctant to purchase.
Lenders must help
first-time buyers
BRIAN MURPHY
HEAD OF LENDING
MORTGAGE ADVICE BUREAU
earning around £33,000 – much the
same as the past two years.
Key figures are those of the
typical loan advance and
percentage loan-to-value. The
average advance peaked at £119,250
in July 2008 – widely thought to be
the peak of the house price market
– and the average percentage
advance was 90%.
Since those giddy days the
average first-time advance has
fallen almost every month to
£97,000 in January 2009. More
importantly the average LTV has
reduced to 76%.
This demonstrates the lack of
appetite that lenders have for
higher LTV lending and highlights
that without greater lender
involvement in providing finance
for that first link in the chain, we
are unlikely to see any real changes
in activity any time soon.
MORTGAGE STRATEGY March 30, 2009 15
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