In the wake of a lot of the large buy to let lenders indicating that they are only willing to deal with FSA regulated brokers, Mortgages For Business have launched a network for unregulated advisers who wish to transact buy-to-let business only.

They seem to think that this network is the best solution to allow unregulated mortgage brokers who are only interested in this section of the market to continue to trade. The reason they have opted for such a specialist network is so that they do not create a situation where brokers are not paying for services they will never utilise.

Nick Blunt, head of business partner development at Mortgages for Business, explained: “The solution for many brokers would be to join a large mortgage network where they can access a number of services – this would include residential services among other things. However, this solution means that brokers could be paying for services that they do not necessarily require.”

The fees they have indicated are £75 a month for appointed representatives and £17.50 for introducer appointed representatives. This will entitle the member to FSA registration, access to products and access to the sourcing and portfolio management tool Mortgage Flow.

We have spoken before in this blog about the number of new landlords that are entering into the market, almost accidently. These are people who bought properties to renovate during the times where it seemed like an easy way to make money and metaphorically got left holding the baby when house prices dropped dramatically.

A lot of these people chose to hold on to their properties and become reluctant landlords rather than sell and make a huge loss.

Now Christopher Hamer, from the Ombudsman for estate Agents, is suggesting that complaint figure jumps in this area suggest some of these perhaps naive, definitely inexperienced landlords may need protecting.

Ian Wilson, Managing Director of Martin & Co, has picked up on this and issues this warning “As properties fail to sell, we have seen a sizeable increase in the number of new (and sometimes reluctant) landlords entering the market. These are the very people who need protecting from the unscrupulous, uneducated or inexperienced letting agent who claims to be able to represent their best interests.”

It seems fair to say that if you are a new landlord it is a good idea to be extra carful about choosing your letting agent. Perhaps ask around more experienced landlords.

Recommendations are always a good way to eliminate some of the risk.

In an interesting take on why there appears to be signs of life in the buy to let sector Knight Frank’s residential development team suggest it could be because it looks like a more attractive prospect than leaving the cash in the bank.

It is an interesting theory. They cite the example of ‘The Waterside’ on the River Severn in Royal Worcester which is apparently achieving rental yields of around 5 percent on buy-to-let purchases.

It could be argued, I guess, that this is more attractive than the current super low interest rates being offered by the banks. As Lyndsey Bellingham, of Elbey Solutions Ltd. says: “Following the recent drop in interest rates many investors are now seeking alternative options to achieve more favourable returns.”

It would seem on the surface that there is more risk involved in choosing the property investment route over shoving your money in the bank but as the old saying goes ‘ you have to speculate to accumulate’, and who am I to try and burst their bubble.
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According to an article in Reuters UK last week, Hometrack have reported that March’s annual prices show a fall that is the biggest ever in England and Wales. Overall house prices are a record 10.3 percent lower than they were a year ago.

This could be slightly misleading though because this shows the fall over the whole year, it is worth noting that the pace of the fall in March was the slowest it has been for 10 months. Still it gives us a perspective on the year in house marketing.

Hometrack further reports that the average selling price for houses in March was £156 000 which was 0.6 percent lower than February and represents the lowest monthly fall since May 2008. They do say, however, that this slow in the rate prices are dropping could be mainly down to seasonal factors.

“With the expectation of continued increases in unemployment and weak economic growth together with restricted availability of mortgages, it seems doubtful whether the increase in activity and sales will continue to gather momentum in the coming months,” said Richard Donnell, Hometrack’s director of research.

“Prices look set to remain under downward pressure over the rest of 2009,” he added.
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Daniel Thomas of the Financial Times reported last week that things may be on the up and up in the buy to let sector.

His source for this heartening claim is the Association of Residential Letting Agents (ARLA). They have indicated that for the first time in over two years landlords appear to be buying more properties than they are selling.

As there is never any good news without the bad at the moment you will not be surprised to hear that ARLA’s quarterly survey also showed that some landlords were struggling to meet mortgage payments as house prices continued to fall.

Still the fact that people are starting to buy again is at least cheerful news. ARLA contribute this increase to the fact that landlords in a position to are snapping up houses that have fallen to a bargain low price.

Ian Potter, operations manager of ARLA, said: “The data shows that there are bargains to be had in the property market at the moment for those with a keen eye.”

So, as we have said before, despite all the doom and gloom there are still people out their with money who are willing to take a risk.

Last week in The Guardian Patrick Collinson wrote an interesting article on how this country is going to avoid a house price explosion of the type that many believe lead to our current financial situation.

His article was quite critical of the Labour Government in that he says two years ago they thought it was a great idea ‘for households to buy over-priced houses by borrowing loans equal to five or even six times’ joint income.’ He also questions the intelligence of 100% buy to let mortgages and buy to let lending financed through global wholesale markets.

He maintains that Britain and America’s attitude to lending was responsible for this financial crisis we find ourselves in, I would suggest that they were not on their own, in fact virtually every well off country on the planet did the same thing, but I guess he is largely right. So what does he suggest is the way to proof ourselves against this sort of disaster in the future?

Basically, don’t trust the banks to run the country’s finances. He states that after 12 years labour have finally worked that out. Lord Turner has made a number of suggestions for government regulation of the finance industry and most of them do seem sensible.

Collinson points out that these are not new ideas and that countries such as Germany and Hong Kong have had these policies for years.  He also sounds this warning Continue reading →

In among all the doom and gloom that is being thrown around at the moment there are a few people stating that they see the very early indicators of a recovery. This is such cheerful news that I thought I would give you my potted understanding of how that recovery is going to look. According to the experts it comes in four stages.

Stage One: At this point the mortgage sector is still constrained but investment is beginning to be encouraged. You usually start to see some people investing, the cash rich because there are bargains out there and foreign investors attracted by a drop in the value of the pound.

Stage Two: This is likely to be the longest stage and can be mistaken for stagnation. Anybody who is heavily reliant on credit is still excluded from the market and prices are likely to be static. Those who are equity rich though will be starting to become quite active.
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The FT confirmed once again last week that the number of buy to let properties being abandoned is on the rise.

Figures from the Empty Homes Agency show the number of empty homes in England rose to 697,055 at the end of 2008, up from 672,924 at the end of 2007 – the biggest annual rise for 17 years. And as if that is not enough they further predict that things are going to get much worse.

They predict that empty homes will reach 1 million by the end of this year. With a number of landlords just handing back their keys after deciding they cannot afford to keep the property on.

Chelsea Business Society waded into the debate to give us some much needed perspective though with a spokesman stating “Exact numbers are confidential but in 2007 there were less than 25 for the total year and for 2008 we experienced an upturn of approximately two times this number.

“Against a backdrop of approximately 95,000 loans, this is something which does not give cause for concern.”

Thank goodness for someone giving us other than gloomy news.

It seems that grim news is fairly par for the course at the moment.

The FSA  kept the trend going last Thursday,  when they suggested that 2 million UK homes will be in negative equity by the end of the year.

And that is just the homes that owners live in. In another cheerful piece of information they further suggest that 500,000 buy-to-let houses will join the two million.

In reality what this means is that one in four homeowners would have to find other funds to pay off their homes if they were to sell now. That figure is one in two for the buy-to-let market.

This is a kind of pressure the housing market could well do without at the moment. It is likely to lead to more financial distress for beleaguered homeowners and landlords.

If you are not selling your home you may think that it is no big deal if you are in negative equity but in a lot of cases you will be wrong.

Remortgaging to try to take advantage of the low interest rates in a fixed term deal could also be a nightmare for you.

Remember, banks base their interest rates, in part on your LTV or loan to value rate. If your house has slipped into negative equity you may find yourself paying top dollar when it comes time to re mortgage.

In a slightly different take on things than groups I wrote about earlier in the week, Savills estate agency sees plenty of opportunities ahead for buy to let landlords.

They say that though the fall in house prices is not quite over it is likely to be far less dramatic than that which we have already experienced. They also point out that as we start the long climb back to recovery, buy to let landlords will have some excellent opportunities to profit.

Yolande Barnes, head of residential research, said: “In the medium to long term, the inability of first time buyers to raise deposits rather than the inability to afford mortgage repayments mean that they will remain excluded from entry to the market, boosting demand for private rental property and co-ownership or equity loan schemes.

“This presents a huge opportunity for investors in private rental stock. If acted upon this should, in turn, underpin the recovery.

This sounds very much like a win/win situation and at present any talk of one of those is very cheerful indeed. It certainly beats a situation where everyone loses and we have had our fair share of those recently.

They do point out that this recovery is likely to be a fairly slow process but still things are at least beginning to look up if they can be believed. Barnes had this cheerful thought to put to us.
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