February 18, 2013

Bob Young is managing director of CHL Mortgages



I’ve spoken at length in my previous columns about the importance of true competition returning to the buy-to-let market and, if my first impressions of 2013 are anything to go by, it appears that I have been granted my wish.


First up was the news from Moneyfacts that buy-to-let fixed mortgage rates are now at their lowest levels since 2007. After averaging out at 5.77% in 2010 and 5.04% in 2012, the current norm is 4.69% which is closer to the types of products we witnessed pre-crash. There are also exactly 100 more products on offer to prospective landlords at present (486 v 386) which provided irrefutable evidence that competition is returning to the market, providing property investors with more choice than in the dark days of 2009 and the immediate years after.


Further encouragement came in the shape of research published by TBMC and Paragon Mortgages. TBMC’s index, covering the final quarter of 2012, revealed a trend of falling rates, rising LTVs and increasing yields – all music to the ears of the nation’s landlords.


In fact, this convergence of good news provided such a fillip to property investors that buy-to-let lending was up by almost a fifth on the equivalent period in 2011 according to the Council of Mortgage Lenders. Paragon’s positivity manifested itself in the news that 41% of landlords expect tenant demand to increase in 2013. As a result of this, 15% of those surveyed intend to expand their portfolio in the coming 12 months.


These three developments are just a snapshot of the groundswell of optimism surrounding the private rented sector at present.


Success begets success and the more such good news spreads and influences investor confidence, the more likely lenders are to pick up on the trend and redouble their buy-to-let focus.


Rightmove’s latest Consumer Rental Forecast suggests as much and they expect an influx of so-called ‘virgin’ landlords to supplement the existing ranks. Rightmove is predicting a spike in this new blood higher than has been witnessed in more than a year.


While a burgeoning sector is good news in most respects, it is to be hoped that any new entrants – be they landlord or lender – behave in a responsible and professional manner and view property as a long-term investment and not just a way to turn a quick buck.


The actions of such short-termists can be damaging to those who have spent years establishing their reputation, so hopefully any negative impact is minimal. 


2013 may well be the year we start to see a renewed threat to the established order of buy-to-let lenders.


It is probably fair to say that a handful of institutions have accounted for the lion’s share of volumes in the past few years, but now we have what looks like an emerging rate war on our hands, there can be less room for complacency. With rates tumbling across the board and LTVs nudging upwards, the chips are stacked in favour of the landlord and lenders are aware of this.


Expect to see a number of new entrants hoping to capitalise on this fervent demand and perhaps even the return of a few sleeping giants that have shied away from the sector in recent times.    






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