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Landlords are not calling time

New investors in the buy-to-let sector have halved in the past year, according to figures released by Mortgage Trust, but brokers say established landlords are ensuring that the market remains fluid.

Mortgage Trust’s survey of borrowers found the number of new investors had nearly halved from 23 per cent in July 2004 to 12 per cent in May this year. Figures from the Council of Mortgage Lenders show a decline of 4 per cent in new loans in the first half of this year.

But Mortgage Intelligence managing director Sally Laker says BTL and sub-prime are two areas that have been relatively buoyant through-out the housing market downturn. “From a broker perspective, there is still BTL business even though new investors may be down. It is about managing portfolios for clients who are currently landlords and making sure they are remortgaging to another good rate.”

The CML figures show a slight upturn in the BTL market for the first half of this year, with lenders advancing around 9.9bn in new mortgages – an increase of 0.1bn from the second half of 2004.

Assetz managing director Stuart Law has increased his personal portfolio by 50 per cent in the past three months because he says there are “superb opportunities”. He claims the firm’s sales have gone up by 5 to 10 per cent compared with two months ago. “The negativity in the national media press would make you think it is all doom and gloom but the reality is that now is the most perfect buying time,” he says.

Law says the upturn in the market is due to providers relaxing their lending criteria on BTL mortgages. The reason for this, he says is that lenders had no choice but to do this in order to keep business volumes flowing.s

The flexible lending criteria that he has seen include deposits of as little as 5 per cent and rental interest cover at 110-125 per cent, as opposed to 130 per cent required a year ago.

Mortgages for Business strategic development analyst Graham Dowson says lenders’ criteria have relaxed because the market is characterised mainly by professional landlords rather than first-time investors. Dealing with professional landlords, he says, means lenders are exposed to less risk and can therefore afford to relax the criteria. But he does not see the criteria loosening up much further as “there is only so much that a lender can actually relax”.

Dowson believes the days of having BTL owners with one or two properties are disappearing and says he gets fewer speculative enquiries from potential investors – a theory backed up by figures from Mortgage Trust. The company report that 13 per cent of landlords own 74 per cent of the stock and 53 per cent of landlords own just 3 per cent of stock. Marketing manager Nicola Severn says: “This is a market dominated by established landlords who know what they are doing and are not the get-rich-quick speculators. The latter group is disappearing from the market.”

Laker wonders if there will be a return of the five-year fixed-rate mortgage. She says: “It very much depends on long-term thinking and demand and I think that it may be sufficient to get people thinking that perhaps they should. It needs five-year fixes to be attractive enough for people to go in.”

Mortgages for Business managing director David Whittaker is seeing evidence of the return of five-year money. He cites the five-year fixed rate from Mortgage Express, with a rate of 4.69 per cent and a 1.5 per cent fee. He says: “Almost against our predictions, this product has been moving quite well and has been quite popular.

“Traditionally, a buy-to-let customer has always had this three-year horizon but, all of a sudden, they are seeing slower growth and a good rate and some of them are now going for five year money. It seems to have hit sentiment at the right time.”

Whittaker thinks that to a certain extent, the lack of new investors is a positive thing. He says: “I think the market will thrive better for the lack of new investment companies who do not know what they are doing. I think you will find what is happening now is the investor who has been in for a year or two and who has been taking a bit of a holiday is now starting to get active again.”

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