ROOF Blog

Buy-to-let investors will not be able to cope with demand unless they are able to access government support, the Intermediary Mortgage Lenders Association (IMLA) has said. After surveying 506 mortgage brokers, the IMLA found that 80 per cent of first-time buyers were unable to secure a mortgage and were choosing to rent instead. It argues that the government should support buy-to-let lenders so the rental market can make up for the ‘downward trend’ in home ownership.

One in five homeowners could fall into negative equity, the Financial Services Authority warned in its annual financial risk outlook. If house prices decline by 30 per cent from the 2007 levels, 2.5 million households – 21 per cent of all mortgage holders – would face negative equity. Half a million of these are thought to be holders of buy-to-let deals, which the FSA singled out as of particular concern. The FSA believes the government’s banking bail-out will work and the UK will experience only a ‘mild’ recession.

Research from the Association of Residential Letting Agents has found that buy-to-let landlords are expecting to hold their properties for up to 20 years. The proportion of landlords who plan on keeping their properties for at least the next 12 months has risen from 77 to 88 per cent, and more than one in five is expecting to keep property for more than 20 years. The average life expectancy of a residential property investment is 16.3 years.

Propertyfinder.com, Britain’s longest established property website, has bucked the trend and placed a prediction on the level that house prices will fall in 2009. It said that the market, which was already skewed towards buyers, would be dominated by ‘bargain hunters’ including professional buy-to-let buyers. House prices would fall by a further 12 per cent next year, but Propertyfinder insisted that the worst was over in terms of the level of house sales. It also predicts that the rental market would remain buoyant, and although falling initially at the start of the year, will begin to go up again by the end of 2009.

Several of Britain’s biggest lenders are however, tightening their criteria on buy-to-let mortgages, depriving many investors of the chance to take advantage of falling prices and low interest rates. Just 27 out of 97 lenders are offering buy-to-let mortgages according to a survey by one analyst, with the best rates for landlords about 1.5 per cent higher than residential mortgages. Most lenders have also increased the level of deposit required to out a buy-to-let mortgage.

The government is considering forcing mortgage lenders to give more notice to tenants who could be evicted if their buy-to-let landlord faces repossession. Currently lenders must send a letter to tenants at least two weeks in advance of a repossession hearing involving their landlord, but changes are planed to increase this to seven weeks. Lenders argue that they already make every effort to contact tenants who could be evicted. Landlords with buy-to-let mortgages are now falling behind on their repayments more quickly than owner-occupiers according to the Council of Mortgage Lenders’ latest figures.

Nine UK building societies have had their credit ratings downgraded by agency Fitch as falling house prices and the worsening economy are ‘likely to hit profits’. Fitch said that it was particularly concerned with the large exposure of building societies to sub-prime mortgages, buy-to-let loans and high loan-to-value deals. The ratings of a society indicate the likelihood of it defaulting on its loan, while a lower rating makes it more expensive for that organisation to raise funds. A Building Societies Association spokesperson said that the downgrades would not necessarily lead to mergers.

Some buy-to-let property courses are urging members to cash in on rising home repossessions by persuading desperate homeowners to sell and rent back their properties. More than 20 groups in Britain are promoting the technique as a get-rich-quick method, according to an investigation in Investors Chronicle. Those attending free seminars are put under pressure to sign up to expensive courses which will teach them how to ‘exploit the falling price of property’. Some are told to target homeowners on the brink of repossession as a way of forcing down prices and securing ‘instant tenants’. Courses are being advertised at between 1,500 and 5,000. One company advised evicting tenants after six months to reduce the potential risks from people who might struggle to pay rent.

From today, all landlords must now give new tenants a certificate showing the rented property’s energy efficiency. The energy performance certificate, providing information similar to the ratings system on home appliances, is intended to allow tenants to check the energy efficiency of a property’s insulation, double glazing, boiler and appliances.

This comes as a new report show that 79 per cent of renters are worried about the cost of their household bills, while 77 per cent don’t believe that their landlords care enough about energy efficiency. After location, household bills are now the most important factor in choosing a property to rent.

New rules have also come into force today allowing homes to be extended without planning permission. As many as 80,000 households will no longer have to seek planning permission for improvements such as loft extensions under 50 cubic metres or putting in permeable driveways. ‘Large or intrusive’ improvements will still require planning permits, however.

Meanwhile home information packs are being investigated by the Trading Standards office in Birmingham, which has found that housebuyers are being misled because information supposed to be found in them is inaccurate, incomplete or missing. Officers went to 15 estate agents and asked to see the Hips for a selection of properties and found the majority were unsatisfactory.

A new report out from the National Housing Federation shows that waiting lists for social housing in the North West have increased 75 per cent in the past five years, more than any other region. Despite falls in house prices, affordability remains a major problem, and nearly half a million people – more than 212,000 households – are now on the region’s waiting list. The document also contains the latest forecast from Oxford Economics anticipating a rise in property prices from 2010, which is likely to worsen the situation even further.

The Crosby report - looking at ways to kickstart the mortgage market – has been delayed by two weeks to take into account the market turbulence of the past month. An interim report in July has been widely criticised, and the full report is expected to address whether the government should extend the special liquidity loans to banks past January 2009, or guarantee high-quality mortgage-backed securities.

But the report can’t come fast enough for some, as hundreds of mortgage deals vanished yesterday after the report’s delay was announced, and lenders were uncertain about access to sources of finance. In the past few weeks interbank lending has practically dried up and the cost of wholesale borrowing has risen dramatically as a result. Accordingly around 10 per cent of deals were dropped yesterday, adding to the withdrawal in the past year of 85 per cent of buy-to-let mortgages and 60 per cent of residential mortgages.

Figures published by the department for Communities and Local Government show there is enough brownfield land in England to accommodate more than one million homes. Of the land suitable for housing, just over half was currently in use, while the rest is vacant or derelict. The report added that although the amount of brownfield land suitable for housing had decreased by seven per cent since 2002, the ‘estimated housing capacity’ of brownfield land had increased by 19 per cent.

Homeless people are not receiving adequate healthcare because services do not cater to their needs, St Mungo’s have said. It found that 32 per cent of people it works with have alcohol dependency and 63 per cent have drug problems, almost half have a mental illness and 43 per cent a physical illness. Overall, 83 per cent of the homeless people St Mungo’s works with have at least one condition but a third are receiving no medical care at all.

During the past three months the private rented sector has seen an increase of almost 20 per cent in new tenancies, according to a quarterly survey by the Association of Residential Letting Agents. The rise in demand has lead to an increase in rental return, from 4.8 per cent to 4.9 per cent for both houses and flats across the UK. Outside of London, 64 per cent of agents report that tenant demand exceeds the supply of property, while in London this reduces to 41 per cent. The average time a rental property remains empty is for four weeks or less, with the average length of a tenancy at 16.7 months.

Estate agents are selling one property a week, the lowest level since the Royal Institution of Chartered Surveyors (RICS) survey started, 30 years ago. RICS blamed the lack of activity on the mortgage drought which was ‘stifling’ buyers and subsequent speculation over a stamp duty holiday. New buyer enquiries fell slightly, as 28 per cent more surveyors saw a fall than a rise in the number of enquiries, and there has been very little improvement in the house price balance, with 81 per cent of surveyors reported a fall than a rise in house prices.

Meanwhile tighter lending criteria and uncertainty in the market saw loans to first-time buyers continue to decline. During July, according to the Council of Mortgage Lenders, loans were down five per cent from June, and a whopping 48 per cent year on year. The average first-time buyer also needed a larger deposit – 15 per cent in July, up from 13 per cent in June.

Chancellor Alistair Darling who welcomed the nationalisation of Freddie Mac and Fannie Mae in America, is waiting on a report from Sir James Crosby, former chairman of HBOS, before intervening in the housing finance market said a senior government official. He is considering proposals to renew or extend the special liquidity scheme which allowed banks to swap mortgage-backed bonds with Treasury bills that can then be used to raise funds in the markets. Last week the Council of Mortgage Lenders called for an early decision to restore market uncertainty, and yesterday Nationwide repeated the ask. The chancellor is likely to present his decision in the pre-budget report late next month.