Newsletter May 2009
Base Rate stays at 0.5%
No surprise that the Bank of England have kept Base Rate at 0.5% for another month. Time will tell whether the Bank’s Quantitative Easing programme will have the desired effect of boosting the supply of funds in the market but, dare I say it, there appears to be some stability returning to the market. It would not surprise me to see Base Rate remaining at 0.5% for the next 12m!
The availability of mortgage products is also improving. Great rates are now available for your own residential mortgage and we are also helping a number of property investors who are now looking to snap-up bargains and expand portfolios. Our message continues to be that now is the time to act whether you are looking to purchase or remortgage. Buy to Let fixed rates, and residential fixed rates and have bottomed out and whilst Base Rate is expected to stay low for some time, the cost of longer term funds is on the rise. If you are looking for stability during the next interest rate cycle and want to lock in for say 3 or 5 years you will need to move quickly.
You can also keep an eye out for further news via our Buy to Let Blog and residential blog as well as e-mails over the coming days and weeks.
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RICS Housing Market Survey March 2009
Further signs of improvement in activity indicators
Key points:
- New buyer enquiries rise for the fifth consecutive month leading to an increase in both newly agreed sales and sales expectations
- The sales to stock ratio edges upwards for the third successive month to stand at its best level since August 2008
- New instructions continue to decline resulting in inventory on estate agents books dropping to the lowest level since September 2007
The seasonally adjusted net balance of surveyors reporting falling rather than rising prices recorded a modest improvement in March but at 73.1, it remains deeply in
negative territory. The latest reading was, however, the best outcome since February 2008.
Significantly, the tentative signs of a pick-up in activity have become more broadly based over the past month. New buyer enquiries have now increased for five
consecutive months with the positive net balance in March climbing to its best level since September 2003. More importantly, there is now clear evidence that the
higher level of buyer interest is feeding through into actual sales.
Newly agreed sales, measured on a net balance basis, rose over the month as did the average sales per surveyor series (for the first time since the tail end of 2007).
Meanwhile, the number of new instructions of residential property continues to decline albeit relatively modestly in March.
This relentless fall in homes coming to the market (which dates back two years) is now becoming very visible in the diminishing stock of unsold property.
The latest data show average stocks per surveyor standing at just 66.7. This is the lowest number since September 2007 and almost 25% down on where they were a
year ago. The drop in the level of stocks on estate agents books coupled with the rise in sales has pushed the sales to stock ratio, a key guide to the future price
trend, higher for the third successive month. The latest reading of 14.6% is the best since August last year and compares with the low of 12.9% touched in December.
Confidence in both the sales and price outlook improved over the month. In the case of the former, the net balance of surveyors with a more positive view rose to 17.
This series has recorded a positive net balance in six out of the last seven months. On price expectations, the net balance still remains comfortably in negative territory
but the reading of -55 is the least worst in more than a year and considerably better than the -88 net balance registered in January.
From a regional perspective, the net price balance improved in most parts of the country. London, the South West and Scotland produced the most striking
performances. By way of contrast, East Anglia, the East Midlands and the North West saw a worsening in the net price balance.
The negative price balance in Northern Ireland remained little changed from February reading.
The growth in new buyer enquiries increased most notably in London in March but Wales and the North also saw meaningful rises.
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Buy to Let product availability up 58% says MFB
Buy to Let product availability has increased 58% since December 2008, according to our latest Buy to Let product availability figures. Albeit from an all time low, the
number of mortgage products available to landlords has been gradually rising, giving landlords who want to take advantage of low house prices better financing options to expand their portfolios.
By using detailed product availability information from our market leading Buy to Let mortgage sourcing tool, Mortgage Flow, we noted that whilst product availability is still low, at 20% of 2007, product availability has risen 58% since the end of 2008. However, we stress that product availability is certainly nowhere near the levels pre credit crunch and advised that using a broker such as ourselves, with access to the entire market has never been more crucial.
Mike Freeman, Technical Support Manager said:
"Whilst there is no doubt that Buy to Let mortgage product availability is at about a fifth of the level of 2007, the good news is that product availability has improved since the low of December 2008. With the market starting to bottom out and landlords beginning to buy up properties at low prices, lenders are beginning to feel more secure."
"In addition we've actively been talking to lenders who we have long term relationships with and there is a feeling that we may see a positive shift in lending criteria with a particular focus on loan to value ratios. This is very positive and shows growing confidence in the Buy to Let market."
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CML: Budgetary Commentary
The Council of Mortgage Lenders responded to the modest measures announced by the Chancellor in the Budget as helpful, but unlikely to make much of an impact
overall on the housing market.
The relevant measures include -
- The introduction of a scheme to guarantee mortgage-backed securities
- Maintaining the standard rate of 6.08% at which income support for mortgage interest (ISMI) is being paid for a further six months (to December 2009)
- Extending the criteria for mortgage rescue (the scheme being delivered via local authorities) so that negative equity cases are not automatically precluded
- A new £20 million scheme for local authorities to provide loans to families at risk of homelessness
- An extension to the end of the year of the £175,000 starting threshold for stamp duty
- An £80 million extension to the Homebuy Direct scheme
- Extension of ISA allowance from £7,200 to £10,200, providing a modest boost for the outlook for retail savings, and hence funding.
Commenting on the measures, CML director general Michael Coogan said:
"The most important element of this Budget for the mortgage market over the long term may prove to be the new asset backed securities guarantee scheme. This potentially offers an opportunity to restart the capital market funding for mortgages that will be a crucial factor in delivering an adequate supply of mortgage credit.
"Although today's Budget measures will have little short-term impact on the housing and mortgage markets, they do at least remove some of the uncertainties associated with the potential impact of withdrawing stamp duty and ISMI concessions too early, and provide some relief to support the new-build housing market.
"The Chancellor had little room to make substantive interventions, so there are no real surprises in this list. The measures overall are unlikely to significantly improve prospects for higher market activity in the coming months."
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