Buy to Let Blog
Ying Tan's Blog
Ying Tan is widely acknowledged as the guru of the Buy to Let mortgage Industry and expert on the property investment housing market.
Ying is regularly called upon by the mortgage media to provide comment on all areas of the market and is a regular speaker at various events.
In 2010, Ying was voted Best Specialist Mortgage Broker at the prestigious British Mortgage Awards by senior figures within the mortgage Industry.
Ying's blog will be updated frequently to provide an insight into his thoughts about what is happening in the Buy to Let market place.
Spring is in the air and the latest buy-to-let figures on valuations and remortgages show that the market is blossoming this year.
After a bitterly cold and crisp winter, the spring weather seems to have finally arrived. For me, the spring season always represents a positive start and
I believe latest figures are giving us that boost we have been seeking.
In my last column, I noted that falling buy-to-let rates indicated now was a great time for investors to remortgage and, as such, presented an excellent opportunity for brokers to win back remortgage business. Recent figures released by Mortgages for Business have backed this up.
The figures, revealed in Mortgages for Business’ buy-to-let index, show remortgaging business has soared by 26 per cent in the first three months of 2013. In the first quarter, 69 per cent of all residential buy-to-let transactions were remortgages, up from 43 per cent in the fourth quarter of 2012.
The steady increase in valuations in the buy-to-let residential sector is also continuing, according to figures from Connells Survey & Valuation, which show buy-to-let valuations increased 45 per cent month on month, making March 2013 activity levels 19 per cent higher than March 2012.
Meanwhile, house prices have hit a record high for this time of year. According to Rightmove, the average asking price is now £244,706, having risen by £15,717 since the start of the year.
This increased activity and upward trend figures is encouraging to see. It is always good to go into a new season with a boost in business and the obvious opportunities available for brokers could certainly provide that.
Product wise, there is plenty of good deals on offer for those looking to remortgage.
Hinckley & Rugby leads the way with its show-stopping two-year discount at 60 per cent LTV. It has a flat arrangement fee, free valuation and no ERCs.
Meanwhile, Accord Buy-to-let continues to offer competitive rates in an attempt to be a leading buy-to-let lender, with its two-year loan fixed at 75 per cent LTV. It has a low percentage arrangement fee and comes with £250 cashback on completion.
Elsewhere, it was interesting but not surprising to read that the number of tenants in severe arrears rose by 4.8 per cent in the first quarter of 2013. This counteracts the improvements made in 2012 which saw, at the close of the year, severe arrears down by 14.5 per cent. Tenants are classed as being in severe arrears when they are two months behind in rent.
Following Christmas, money is always tight and this year, with fuel bills continuing to rise and other household bills showing no sign of falling, it is not surprising that tenants are struggling.
While these times are hard for tenants, they also cause challenges for landlords. Thankfully, the falling buy-to-let rates resulting from the Funding for Lending scheme are giving landlords some leeway and helping them to deal with arrears.
However, there are ways landlords can help protect themselves when letting a property, including ensuring they get previous landlord and current employer references, checking bank statements for proof of liquidity and taking out rent guarantee insurance.
The buy-to-let market is buoyant as rates spiral downwards and brokers have an opportunity to win back remortgage business.
With buy-to-let rates on a downward spiral, investors have a greater incentive to expand and refinance their portfolios to more cost effective rates.
This is increasing business activity and keeping the buy-to-let market buoyant.
Since the credit crunch, investors reverting to 1.75 per cent over bank base rate have had little incentive to remortgage their properties.
However, investors who took out new business in the last two or three years face higher reversionary rates at bank base rate + 4.5 per cent, and a lenders’ SVR often in excess of 5 per cent.
This has made remortgaging a more attractive option for these investors, and provides brokers the opportunity to win back re-mortgage business.
Brokers can demonstrate that even after associated fees are factored in moving to a lower rate will reduce monthly payments and save on total costs over a given period.
Previously, re-mortgage business was only economical for landlords looking to release equity for further investment.
Hinckley and Rugby Building Society last week released a ground breaking buy-to-let deal, being the lowest on the sourcing systems and the most competitive to hit the market in recent times.
In addition to a market leading rate it comes with a free valuation, no early repayment charges and a flat arrangement free.
Previously, great headline rates were accompanied with high percentage fees, driving up the overall cost.
This rate pushes the boundaries on this notion.
As lenders hunt for more business, the bigger lenders are hesitant to engage in a rate war that will reduce margins.
Instead in recent weeks, what we have seen is lenders loosening their criteria to attract new business.
After some initial mixed messages both BM Solutions and The Mortgage Works both confirmed that they would lend on properties which housed department for social security tenants.
This is an area which historically lenders have shied away from due to the perception of lower quality tenants, and difficulties in getting possession in the event of arrears.
Unlike in the past, BM Solutions will also lend on properties intended to house students.
This relaxation in policy is very positive news.
Students must be on the same assured shorthold tenancy agreement and a maximum of five students is allowed.
This is an interesting development as existing lenders for student properties cap the number of students at four.
This development potentially opens up a segment of the market that would usually have sought funding from lenders with a House of Multiple Occupation range. HMOs still remain outside BM Solutions lending policy.
Finding good, qualified consultants is a constant challenge and we need to better understand their concerns to retain this pool of talent.
January was a record month for us and as I write this article we currently have eight new trainee consultants on our induction programme, our highest intake of staff since the onset of the credit crunch.
When we sourced for new recruits, we advertised for both experienced and trainee consultants. For the trainee position we received over one hundred applications, compared with the experienced position where we received only two.
This disparity typifies the current state of our Industry where sourcing good qualified consultants is a constant challenge. This experience shows that despite the adverse publicity the market has received in recent years, there is no shortage of candidates wanting to enter the industry. However, it also shows that the industry needs to better understand the concerns of experienced consultants to retain this valuable pool of talent in the industry.
In the last three to five years many mortgage consultants have left the Industry making the recruitment and development of new talent a priority.
In our recruitment procedure we look for individuals who have the hunger to learn and the desire to succeed. Product and industry knowledge can be taught, CeMAP can be studied for and exams taken. However certain interpersonal skills are ingrained in a person’s DNA, they either have it or they don’t. These soft skills are far harder to teach. Personally I like candidates with a strong sporty background as they often bring with them transferable skills such as teamwork, leadership and initiative.
In the past we have interviewed experienced candidates who initially showed promise, but after further investigation reveal themselves to be tired and disillusioned with the industry. Many have worked tirelessly over the last few years with little return, sapping their energy and enthusiasm and so we look to new blood to swell our ranks.
The benefit of recruiting trainee consultants is that you can mould them into the ethos of the company. They have no preconceived ideas and the current climate of tight controls and tough underwriting is the norm. The downside is the extra investment in training, something which not all brokers have the time or money to do. However I believe that short term pain will ensure long term gains.
Looking at the market this week, Investec has launched into the mortgage market targeting qualified professionals and business professionals for larger loans. This type of client often has complex and sophisticated circumstances. Investec not only are unfazed by this but indeed thrive on it.
They will also consider foreign nationals and returning ex-pats, an area which is currently underserved. Their minimum income requirement is one of the highest in the Industry. However given the type of client they are looking to attract this does not seem unreasonable.
Precise Mortgages has launched some exclusive products for properties in the south of England, first time landlords are accepted and there is no minimum income required. This in addition to the refund of the valuation and attractive rates at 75 per cent LTV makes it an attractive proposition.