Time to Switch to a Fixed Rate Mortgage?

The writing really does seem to be on the wall for the tracker mortgage. Most of us have really enjoyed the period of plummeting interest rates and repayments. I even admit to being a little gleeful at times, but all good things must come to an end. And it seems most borrowers are recognizing that this particular joy is very close to having run its course.

Figures from Legal & General show 87% of residential borrowers went for certainty when picking their home loan, up from 71% in the first three months of this year. The reason for this is likely to be the fact that people now view an interest rate hike early next year as inevitable.

In terms of which fixed deal people are choosing, two year terms seem to be the most popular and that probably reflects people’s uncertainty about the economic times. Three year fixes are also showing a huge amount of appeal.

It has to be said that people thinking of fixing a mortgage need to get moving on it because the banks are moving like lightening to hike up their fix rate terms. Nationwide increased their rates again this week, making it the second time in under two weeks. You can rest assured the banks have not enjoyed this period of low interest rates and will be keen to get them back up where they believe they belong.

Now is the time to fix if it is something you are thinking about.

The Race Is On To Secure Fixed Rate Mortgage

Most experts agree that the Bank Of England is likely to raise interest rates in the next year or so in order to control inflation when we head into economic recovery. According to an article in The Times this week some banks are jumping the gun and putting up rates on fixed term deals in anticipation.

This means that people who are currently enjoying a record low interest rate on tracker loans may need to bite the bullet very soon and fix their rate, if they want to avoid getting trapped by the rate hike.

It is a judgement call for most people as fixing terms now when the rate is so low will mean an immediate jump in monthly repayments for those that have been tracking base. However, waiting could mean a substantially greater jump in the near future.

Louise Cuming, head of mortgages at moneysupermarket.com, said: “Borrowers looking to fix should lock in quickly, before the next tranche of mortgage products come through showing drastically increased rates.”

It is probably sound advice but it is always a bit of a wrench to voluntarily offer to pay more on your mortgage, even if you can see the long term benefits.

Tenants Evicted as Landlords Hit the Wall

There was an interesting article on the This Is Money website this week that looked at the problem of repossessions from the tenant’s point of view.

As the article pointed out, buy to let properties are three times more likely to be repossessed than a normal residential property and when they are, it is the existing tenant who is left high and dry.

It is important to note that tenants are protected if they are still within their tenancy agreement and are abiding by the terms. Some lenders try to evict the tenants when they take over control of the property but in a lot of cases this is actually illegal. Denise Ford, chair of the Association of Property and Fixed Charge Receivers, says:

“I’ve heard of courts granting possession orders and evicting tenants mid-way through their tenancy. That’s not legal, provided the tenants are paying their rent and abiding by the terms of their tenancy. They should go to the court hearing and object.”

This is good advice; as landlords we are very aware that tenants have rights, surely the courts ought to know what they are?

Of course, there is the tricky situation of cases where the borrower has not informed the lender that the property is now rented out. In these cases the tenancy agreement is often not binding on the lender and the tenant can find themselves without much to fall back on.

It certainly is a complicated area

Buy To Let Repossessions Still Rising

After a glut of fairly positive stories regarding the state of the buy to let market, landlordexpert.co.uk chose to bring us back down to earth with a thump with an article outlining just how difficult things still are in the property market.

They point out that Council of Mortgage Lenders figures show 1,700 buy-to-let properties were repossessed by lenders in the first three months of this year. This looks even worse when you take into account the fact that the figure increases to 4,100 properties when cases of lenders appointing a receiver of rent are included.

The article points out that a lot of the trouble still stems from the almost manic rush on property that was taking place in the last few years of the boom period. Real estate agents report that during this period people were committing to places they had never seen or, in extreme cases, that had not even been built yet in order to get into the property action. In many, many cases they paid far too much for these properties. When the recession hit, things got extremely tricky for these investors.

The article also cites the fact that banks have halted the stream of buy to let mortgages and now what is on offer is better described as a trickle. If the current trend of buy to let mortgages continues for the year then there would be an estimated total of 89,600 new buy to let mortgages being taken out in 2009. This figure is in stark contrast to 2007 when when 346,000 buy to let mortgages were snapped up.

Sometimes it is good to be reminded of the reality of the situation.

Fewer Accidental Landlords Cause for Celebration

Further to the week’s earlier reports of a certain amount of stability returning to the property market, there is a knock-on effect from this which will please a lot of professional landlords. The Telegraph had an article last week on the fact that this improvement in the state of the property market is causing there to be fewer new properties being made available for rent.

The Telegraph quotes figures of 62, 765 in April, falling to 34 088 in May. A drop of nearly half! Not surprisingly they are attributing this drop to fewer accidental landlords being created. In other words fewer people are choosing to hold onto their homes and rent them out rather than sell them. A situation that was created by the diabolical drop in housing prices.

Jonathan Moore, UK and Ireland country manager of EasyRoommate.com, said: “What we’re hopefully seeing is a semblance of normality returning to the rental market as many home owners who saw rental as a last chance saloon are now more confident that they can find a buyer if they put their properties back on the market.

“In the second half of this year we would expect to see depressed average rental prices start to rise as the supply-demand balance begins to level out.”

Let’s hope he is right and we can start to get back to normal. Being a professional landlord is never an easy job but a return to a stabile environment will ease things a bit and take away the extra stress a lot of us have been under.

Interest In Property Increasing

The BBC news channel reported this week on the fact that it looks like the house prices in the UK may be stabilising. They state that this is a result of of rising interest from buyers and a falling number of sellers.

According to figures that they quote, enquires by people looking to buy property have increased for the seventh month in a row. Also, they claim, it is at the fastest rate since 1999. Coupled with this, there have been fewer people putting their properties on the market over the past two years.

“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilising,” said Rics’ ( a company that runs surveys to test consumer confidence in the housing market) spokesman Ian Perry.

This does sound encouraging and there does seem to be more of this type of sentiment around recently than at any other time in the last year or so. Still the optimism does come with a warning. Mr Perry also stressed that the recovery of the housing market was bound to be contained by the difficult state of the economy.

All of the good news we are hearing seems to be tempered with a degree of realism but there is certainly more optimism around.

Things are definitely looking up!

Students and Landlords: A Match Made In Heaven

Students have traditionally provided a steady supply of tenants for landlords, and in these hard times it appears that this strong bond is only set to strengthen further.

Landlord Assist has released figures this week that show that students are helping a lot of landlords to beat the recession.

They have shared with us the fact that the latest figures from the UK University & Colleges Admissions Service (UCAS) showed an 8 percent increase in the number of people applying for higher education.

This is excellent news for those landlords with properties near places of higher education. Graham Kinnear, MD at Landlord Assist, said: “Very few students are able to afford mortgages, so there remains plenty of scope in the student market, particularly in so-called university towns. The market tends to be predictable and reliable as students tend to stay in a property for at least a year at a time.

He also points out that at the end of their studies students are most likely to want to return to the places they are from and so, therefore, unlikely to cause any problems by refusing to vacate the property. In many ways they can be the perfect tenants.

A word of warning, though. Students do tend to cause a higher than average amount of wear and tear and that will need to be corrected by the start of the following academic year.

It Never Rains But It Pours

It really does feel like it is open season on landlords at the moment. What with having to pay to register with national bodies and buy to let loans being so hard to get, we really could be forgiven for feeling a little hard done by.

The latest piece of bad news for landlords comes in the form of news that residential landlords could soon be forced to pay up for any water bills left unpaid by departing tenants.

This seems to have been prompted by the state of the Northumbrian Water Company’s finances this year. A report shows a 10.3 per cent fall in pre-tax profits to £152.7 million for the year to March 31. A lot of this is being blamed on bad debt with John Cuthbert, the managing director of the company, claiming that they are very vulnerable due to laws which prevent them stopping supply of water for non-payment.

I have some sympathy with this idea but fail to understand how that becomes the landlord’s problem. As landlords, we all have our own share of bad debt to deal with. It occurs to me that if a tenant has vacated without paying their water bill there is a better than even chance that they were also behind on their rent.

Why should the landlord’s misery be added to by something that is essentially someone else’s problem?

The Irony of the Credit Crunch

It struck me the other day that there is a lot of irony in the current financial situation. A year ago, virtually anybody could get credit and pretty much name their own sum. The difficulty was they were likely to be paying through the nose for the privilege.

Nowadays the price of credit has never been so low but your chances of getting your hands on it, especially if it is for a buy to let mortgage, is slim to none.

A recent report shows that one group of people who do seem to be benefitting form this current situation are key workers. We have all heard about the problems nurses and police officers have had finding affordable housing in the places their jobs take them; this has been particularly bad for those serving in the south of the country.

The Halifax has kept a close eye on this group of people over the years and has recently reported that things do actually seem to be improving for them. In 2007 only 3 percent of towns were affordable to this group in terms of purchasing the average family home. The Halifax indicate that at the moment the that figure stands at more like 21 percent, with police and teachers gaining the most from the affordability shift.

It is good to see that in difficult times at least these important people are gaining something.

Less Risk Averse Banks Turned Blind Eye To Hyped Valuation

Citywire, a well respected financial website, this week published an article outlining the difficulties faced by buy to let investors in the present climate. 

They covered a lot of ground that we have discussed before but it is interesting to see the views of people who are not as close to the issue as some of us obviously are. 

The report confirmed the fact that a lot of people had come into the landlord game very reluctantly when they were unable to sell their properties. It also looked at the fact that this quickly led to an oversupply of rental properties and increased void periods for a lot of landlords. It points out that the number of people attempting to get into the property business is falling for the first time in some years and puts that down to bad publicity about the state of  the rental market at the moment, and also the fact that banks have become far more risk adverse. 

The report suggests that banks were willing to turn a blind eye to over-hyped valuation in a less risk adverse recent past but now are increasingly pessimistic when evaluating a properties worth. This is driving a lot of new buyers away. Along with the fact that very few banks now accept less than a 15 percent deposit and some are asking as much as fifty percent on buy to let, the report concludes that the market should be a lot less crowded in the near future. 

This probably sounds like a very good thing to a lot of established landlords.