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Sally Laker: Reasons to be cheerful

Reasons to be cheerful for those of us in the mortgage market may have seemed few and far between over the last couple of years but we are starting to see some tentative signs that things can only get better.

Home buyers are paying the lowest price for an average two-year fixed rate mortgage since the summer. Rates have fallen to 4.99 per cent, the first time it has been below 5 per cent since June, according to personal finance website Moneyfacts.

A string of rate rises during July saw the average quickly rise, reaching 5.21 per cent by the end of the month.

Falling rates on popular two year fixed rate mortgages, coupled with a rise in the maximum loan-to-value on lender’s most competitive deals suggests that competition is on the increase at last. Lenders finally seem able to relax their credit criteria while remaining within a regulated frame work. Although swap rates have been falling over the last few weeks, mortgage rates on medium term deals are yet to follow suit.

Meanwhile, the number of mortgages approved for house purchase rose to its highest level for nearly two years during October, according to the British Bankers’ Association. Around 42,238 loans were approved for people buying a property during the month, nearly double the number seen in October last year – the height of the financial crisis – and the highest level since January 2008.

The proportion of landlords remortgaging their investment properties has fallen to its lowest level for over two years, according to research from Paragon Mortgages. Paragon’s survey of mortgage brokers found that 39 per cent of landlords obtained a buy-to-let mortgage via a financial adviser for remortgage purposes in the third quarter of 2009, the lowest level recorded since the quarter one 2007.

But the good news is that the proportion of landlords obtaining buy-to-let mortgages for portfolio expansion purposes has hit its highest level since 2001. The survey found that 48 per cent of landlords obtained a mortgage to extend their portfolio in the third quarter of 2009. This represents a rapid recovery from the final quarter of 2008, when just 31 per cent of landlords were taking out a buy-to-let mortgage for portfolio expansion purposes. This leads me to believe that BTL will be hot to trot in 2010, or at least lukewarm.

I’m pleased that landlords are now expanding to their portfolios but they are not remortgaging for two reasons, firstly the low number of mortgages available and secondly there is little incentive to do so because the reversion rates when coming off an introductory deal are so attractive due to the low Bank of England base rate and Libor.

It is also heartening that we haven’t experienced the mass sell-off of buy-to-let property during the recession. In fact it seems that landlords now thinks it’s a good time to start growing their portfolios before house prices start significantly creeping up, which they are starting to do in many parts of the country.

I would echo the sentiments of the Association of Mortgage Intermediaries that we need the Government to increase competition in the mortgage market by drawing Building Societies and non-banking institutions back in to lending to help sustain the green shoots of recovery we are seeing. An extension of the current stamp duty holiday would be a step in the right direction too along with more help for first time buyers. The Government could increase incentives around shared ownership schemes for example. This, along with the availability of higher LTV loans, increased availability of funding and attractive fixed rate deals would be of real help.

Sally Laker is managing director of Mortgage Intelligence and Mortgage Next

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I find it astounding that mortgage brokers are still in business, they offer nothing to the client and I feel they will go the way of the dinosaur. Mortgages are very very simple and unless you are trying to fiddle the system you should go directly to the bank, with the new it systems in place the broker will thankfully not be required and fees will over time be dramitically reduced.

  2. Michael White CEO Emailmortgages 18th December 2009 at 7:01 pm

    I too find it astounding to read such nonsense comments from Mr ..very very simple…Jones, above.

    I will not dwell too much on the distribution strategies for banks and building societies. Suffice to say, if lenders are prepared to pay a modest procuration fee to secure mass and well organised mortgage distribution then it clearly makes perfect commercial sense. My rationale applies particularly to those mortgage intermediaries who provide ‘fee free’ professional advice to the public.

    I can only imagine these naive and indeed very very simple comments from Mr Jones are the end product of a rash moment following perhaps a long Christmas liquid lunch which affected logical opinion and also the ability to spell? (Dramatically..)

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