We are clearly a long way from the middle of 2008 – a period when it began to dawn on all of us how difficult the mortgage market was going to become – but this week in the buy-to-let sector we reached loan levels which have not been seen for nearly six years. The latest CML figures for quarter one this year revealed that the progression of today’s market has taken us into territory not seen since those days, although admittedly we are a long way off the peaks seen in mid-2007.
Looking back at those pre-crunch years you can get a very powerful idea of how buy-to-let lending was working – for instance, in quarter three 2007 buy-to-let loans for purchase almost touched 50,000 while those for remortgaging were well over 40,000. Figures for the first quarter of this year were nowhere near this level however, as stated above, they were the best since 2008 with 23,610 loans advanced for purchase and 23,000 for remortgage. The bar-chart graphs are undoubtedly showing a real progression since the market lows of early 2010.
Last month I touched on a perceived resurgence in landlords remortgaging their properties as they not only looked to take advantage of the keener rates available but also no doubt sought to lock-in at rate levels which may not be around beyond the start of next year when the anticipated Base Rate rises begin. The latest CML statistics show the vast increase in remortgaging that has taken place over the course of the last 12 months with a 55% increase on quarter one 2013. In terms of the total value of remortgage loans they hit £3.3 billion for the quarter just gone – 67% up on the same period last year.
This ongoing trend for remortgaging looks set to continue apace during the rest of 2014 as well. In a survey by specialist advisers, Mortgages for Business, 45% of landlords said they planned to remortgage before the end of the year. This appears to be because of keener rates with 34% now looking at five-year fixed rate products allowing them to ride out any price rises over that period. Indeed, the lender community seems happy to respond to this increased demand for products – just last week NatWest revamped its entire buy-to-let range cutting rates and adding three new five-year options. Landlords have spoken and lenders are clearly responding.
Of course this does not mean that landlords (and brokers) are not clamouring for more changes and, obviously, criteria changes. Almost half of all landlords surveyed by Mortgages for Business said they would like to see a relaxation of lending criteria with many wanting a removal of non-property related income requirements and a relaxation of age restrictions.
I can understand why professional portfolio landlords want the income requirements loosened – ostensibly because if this is your profession then you may not have much outside income to declare anyway. However, for what we might call ‘amateur landlords’ ensuring that a borrower has sufficient non-property related income to pay the mortgage when there are, for example, rental void periods is crucial. The age restriction issue is a rather complicated one especially given the changes to pensions announced recently and the anticipated greater interest in investing in property by pensioners. Will lenders want to restrict their products to those with significant deposit levels just because of their age? I suspect not and I’m sure there will be further movement on this by lenders in the very near future – in fact The Mortgage Works has already removed its restrictions.
All in all, this is a particularly positive time for both buy-to-let mortgage advisers and their clients – increased demand is being reflected in increased competition amongst lenders and despite that rate rise getting closer and closer with every day those wanting to refinance, or secure their first mortgage, anytime soon should have a strong pick of products and rates to choose from.
Bob Young is managing director of CHL Mortgages
