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All change

If a week is a long time in politics, as remarked by Harold Wilson, a month in today’s mortgage market is interminable. Last month I reported some good news on mortgage rates, with the bigger lenders – Halifax, Abbey, Nationwide and Lloyds TSB – reducing fixes and trackers on the back of falling swaps. The situation has now reversed as rising money market rates see lenders hike rates on residential and buy-to-let mortgages.

Landlords in particular have it tough. With Mortgage Express currently closed to new business and other lenders taking stock, landlords coming up to remortgaging may be in for a shock. The wide scope of products and pricing they enjoyed on taking out their existing deals no longer exists.

Brokers will be busier than ever as landlords struggle to place their business. There is also a huge opportunity for lenders keen to pick up good, low-risk business and support the buy-to-let sector at the same time. I have noted before there is great demand for a decent remortgage product for landlords, and since the events of the past few days the clamour has grown ever louder.

Lenders are rightly concerned about risk, given the housing market downturn. However, the long-term sector outlook is encouraging. The National Landlords Association (NLA) says that even after the nationalisation of Bradford & Bingley, prospects for the rental market remain strong. Rising immigration and a growing student population are increasing the demand for rented property, and owing to divorce, later marriage and other lifestyle factors there are more households and people are renting for longer. And with a lack of social housing, families are turning to the private rented sector.

The NLA found the majority of landlords are motivated by long-term objectives and tend to hold on to investment property for around 15 years, regarding it as a genuine alternative, or addition, to a pension when planning for retirement. For the lender, an established landlord – experienced at letting property and with a good track record of paying the mortgage – is relatively low risk. The potential of rental voids is diminished as the landlord will have tenants in place on an assured shorthold tenancy. This means the rental income will cover the mortgage and can be used instead of the surveyor’s valuation to support the rental assessment. It is an easy way of writing good quality business for the lender prepared to offer decently priced products. These lenders are currently thin on the ground.

As clients find it harder to achieve competitively priced finance, the broker who can match the right client to the right lender will find themselves in demand, not only now but in the future when clients need to refinance or when market conditions improve and they expand their portfolios.

Mark Harris is managing director of Savills Private Finance

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