Newsletter November 2009
Another month and no surprise that Base Rate remains at 0.5%. As reported last month, our belief is that Base Rate will remain at this level well into 2010.
What is surprising is the Bank of England’s announcement to increase its Quantatative Easing programme by another £xbn taking the total QE input up to a staggering £2xxbn. We are slowly starting to see the effect of this stimulus and the hope is that liquidity will continue to improve over the coming months.
Residential Mortgage rates continue to improve and we are now starting to see improvements to the pricing and availability of Buy to Let mortgage products. Many property investors our now looking to take advantage of the perceived bottom of the housing market and we are arranging a number of Buy to Let mortgages now at 75% Loan to Value.
There are also improvements in the Commercial mortgages sector with the high street banks slowly coming back in to play. Funding for HMOs and Ltd Co Buy to Lets continues to be available via Mortgages for Business as well as competitive rates for Trading businesses and Commercial Investments.
As always, we have access to all the lenders who are currently active in the market so please do call us to see how we can help you if you require a mortgage.
Keep an eye out for our product alerts, blogs and e-mails keeping you up-to-date on activity in the mortgage market. For more information or to get an overview on how improving activity could help you, call us on 0845 345 6788 or click on the links below.
Click here for Buy to Let mortgages , Commercial mortgages , Property Development Finance and Residential mortgage products.
September gross mortgage lending
Gross mortgage lending totalled an estimated £12.5 billion in September, a 2% rise from the £12.3 billion in August but down 27% from September 2008, according to new data from the Council of Mortgage Lenders.
Gross lending in the third quarter of 2009 was an estimated £38.9 billion, an 18% increase from the second quarter and down 36% from the third quarter of last year.
Behind the modest improvement from August to September and the relative stability of recent months is the balance between the types of lending taking place - there has been a pick up in house purchase activity, but this is off-set by the decline in remortgaging.
CML economist Paul Samter observes:
“House buying activity is running at considerably higher levels than around the turn of the year. However, it remains weak on any historic comparison and is unlikely to rise much further given the constraints the lending community faces and a still difficult economic backdrop.
“But there are some positive signs to look to. While the retail side, both in terms of mortgage and savings activity, has thrown up few surprises, it is encouraging that the wholesale markets have begun to thaw. Some of the UK's highly rated institutions have been able to issue structured finance products backed by mortgages in recent weeks. This is only an early sign of wholesale investors tentatively coming back into the new issuance market, but is welcome nonetheless.”
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Buy to Let and First time buyer demand increasing
Demand from first time buyers is rising, while buy to let investors are now gravitating towards houses than flats says RICS' latest housing market research.
The RICS' new buyer enquires series has reported a positive net balance for 11 consecutive months. On the back of the pick-up in interest in the market, RICS thought it would be valuable to delve a little further into this trend. Questions were asked about the proportion of enquiries coming from first time buyers and whether surveyors are now seeing a rise in buy to let investment.
Additional questions in the August Housing Market Survey focused on the issue of first time buyers. Surveyors reported that 13 percent of new enquiries derived from first time buyers with a net balance of 28 percent reporting that the number of first time buyer enquiries had increased over the past three months. The North West recorded the highest proportion of first time buyers at 23 percent, while the lowest proportion was recorded in East Anglia with only six percent.
The results of the survey, meanwhile, suggest that the net balance of surveyors reporting a rise in first time buyer demand was most rapid in the South East and East Anglia at 56 percent and 43 percent respectively. However, surveyors in Yorkshire and Humberside and the North reported falls in first time buyer demand over the previous three months.
In September, surveyors were asked how buy to let demand had changed in relation to both houses and flats. A net balance of two percent more surveyors reported a rise than a fall in buy to let enquiries in aggregate; tellingly, interest was generally stronger for houses than flats.
London bucked the trend by reporting a positive balance of eight percent more surveyors reporting higher (rather than lower) demand for flats compared to a negative balance of 16 percent for houses - this is arguably a reflection of the different nature of the London rental market and the cost and availability of houses in the capital.
House price falls and lower interest rates have gone some way to tempting first time buyers back into the market. However, buyers still need to have greater deposits to access the market with lenders remaining generally cautious. This is making it hard to translate this interest into hard transactions. Meanwhile, the firmer tone to the market has also rekindled enquiries from buy to let investors albeit in a more measured way than was visible prior to the onset of the credit crunch."
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RICS - Lack of supply pushing up prices
A lack of supply is still underpinning the house price recovery says RICS September housing market survey.
Significantly, the headline RICS house price balance recorded the highest figure since the onset of the credit crunch.
The net balance of Chartered Surveyors reporting rises rather than falls in house prices reached a positive reading of 22 in September, up from 10 percent in August - this is the highest result since May 2007 when the net balance was 25 percent.
The South of England is leading the upturn in prices with the net balance of surveyors reporting rises rather than falls for London and the South East climbing to 79 percent and 52 percent respectively. Elsewhere, the picture is less rosy with Wales and Yorkshire and Humberside registering negative net balances of 15 and 18 percent.
Last month's optimism that vendors were starting to return to the market has proved a little premature. A net balance of only 4 percent of surveyors reported that new instructions had increased in September, compared to a reading of 12 percent in August. Correspondingly, the average number of unsold properties on surveyors' books remained unchanged at 64.
Meanwhile, transaction levels continued to improve in September with sales per surveyor rising to 18 over the past three months. As a result, the closely watched sales to stock ratio - a measure of market slack and a lead indicator of future prices-edged upwards a little further. It has now risen for nine consecutive months and stands at 29, its highest level since December 2007.
The pace of improvement in buyer interest slowed for the third consecutive month. The net balance of surveyors reporting an increase rather than a decrease in new buyer enquiries slipped from 47 percent in August to 36 percent in September. The number of surveyors reporting a rise in new buyer enquires in London dropped back from 71 percent to 45 percent.
A lack of supply is still underpinning the rise in house prices with new instructions to estate agents only edging up very gradually. Meanwhile despite the problems first-time buyers are continuing to encounter in securing finance, the level of enquiries from potential purchasers is increasing. This imbalance between demand and supply suggests that house prices will move higher in the near term."
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