First time buyers attracted to tracker mortgage deals
Expectations of future cuts in interest rates have led to a “greater appetite” for tracker rate mortgages, one expert has claimed.
Sue Anderson, a spokesperson for the Council of Mortgage Lenders, explained that while first-time buyers have traditionally been more attracted to fixed rate mortgages, changing economic conditions are also changing attitudes.
Anderson said: “At the moment the situation is complex because there is some anticipation that rates may fall again this year so there is greater appetite than what there would normally be for tracker rates, which will take advantage of rates if they do fall further.”
However, she added that in opting for a tracker mortgage, first time buyers are taking something of a risk as their payments could increase in future.
Last month, the CML reported that there had been a move away from fixed rate mortgages.
Its figures showed that fixed rates represented 57 per cent of loans in January 2008, down 20 per cent on the figure for July 2007.
Number of buy to let loans exceeds first time buyer activity for the first time
The number of mortgages issued to buy to let investors has overtaken those issued to first-time buyers for the first time since records began.
The figures have reignited the debate about the impact the booming buy to let market has had on affordable housing across England.
In the last quarter of 2007 81,100 loans were issued to first time buyers – in itself the lowest figure since the first quarter of 2005 and the third worst performance in the last 10 years.
But in the same quarter a total of 84,800 advances were made to buy-to-let investors. It is the first time that investors have outperformed first time buyers since detailed records began.
Loans to buy-to-let investors have shot up over the last few years at the same time as loans to first time buyers have been tailing off. Over the entire course of 2007 350,900 advances were made to buy to let investors and 357,500 loans made to first-time buyers.
In 2001 the figures stood at 72,200 and 568,2000 respectively.
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Buy to let mortgages dry up
Demand for rental properties continued to grow as landlords saw their yields increase says the RICS Lettings Survey. However, access to the buy-to-let market became harder for would-be-landlords as mortgage products became scarce…
16% more Chartered Surveyors reported a rise than a fall in tenant lettings, down from 20% in the last quarter.Significantly, demand for family homes still remains stronger than for flats due to an oversupply of new build.
23% more Chartered Surveyors reported a rise than a fall in demand for houses compared to 12% Chartered Surveyors who reported a rise in demand for flats, down from 15% last quarter.
New landlord instructions (an indicator of supply) declined for the first time in the survey’s history (1998). 1% more Chartered Surveyors reported a fall than a rise in landlord instructions compared to 11% in the previous quarter.
The credit crunch has restricted the number of buy-to-let mortgages approved as well as the number of mortgages available to investors.
However, established investors are reaping the benefits. Gross yields increased at their fastest pace since Q3 2005.
Rising yields may have stopped the recent retreat of landlords from the market. The percentage of landlords selling their properties when tenant leases expire fell from 6.5% to 4.6%.
Rental expectations also picked up sharply and are more than double the survey’s long run average. Key areas enjoying rental growth also picked up sharply in the North, South East and Midlands while London and the South West experienced moderate rises.
RICS spokesperson Barry Hall commented:
“While banks remain cautious about offering loans, demand for rental property will continue to increase with many would-be-buyers unable to make the jump to home ownership.
“Established investors continue to reap the benefits of the current uncertainty in the housing market and have been enjoying the fruits of rising rents, but new investors are struggling to get the necessary finance to enjoy this buoyant sector.
However, some landlords at the margins may desert the market after the drop in capital gains tax occurs in April.”
Landlords link with councils in win-win housing scheme
Evidence emerged this week that the credit crunch could be starting to affect buy-to-let landlords.
The Royal Institution of Charted Surveyors (Rics) said instructions to let residential properties in the UK fell in the fourth quarter of 2007 – the first decline since its 1998 survey.
The fall is thought to be partly a result of less competitive buy-to-let mortgages being available as lenders tighten their criteria.
Given this uncertain environment, landlords are looking for as much security as possible when it comes to letting out their properties.
They can find this security through an innovative scheme allowing councils – in partnership with the private sector – to provide quality accommodation to people who have lost their homes.
It should also provide landlords with long-term tenants as the scheme guarantees rental income for up to five years.
Known as private-sector leasing (PSL), the scheme is run by Orchard & Shipman, a private-sector manager of leased social housing in Scotland and England.
PSL means that those who have been made homeless, perhaps because their relationship has broken down or they have been made unemployed, can rent a property at an affordable cost, rather than being forced into expensive temporary housing, such as guest houses.
PSL now operates in Edinburgh, Midlothian, East Lothian and the Scottish Borders. In Edinburgh, the aim was to provide 1,500 properties by 2010. As it already has 1,200, it is way ahead of schedule.
Landlords are attracted to the scheme as they receive a guaranteed rental income, with no voids, for three to five years with no agency fees.
Father-of-two Kevin Whyte, who bought a two-bedroom flat in Newtongrange after hearing about PSL, was the first landlord to get on board the scheme in Midlothian.
Whyte, 36, who owns a cleaning company, said: “I heard of so many people investing in property but the risk had put me off in the past. I view this as a long-term investment, one which will help when I retire. There is always an element of risk being self-employed. Investing in property is a safeguard. It is also nice to know I have that investment for my two children. Midlothian is a great place to invest as I have found property prices to be lower than other areas. PSL is a great scheme for investors here.”
There are currently 3,600 people on Midlothian Council’s housing waiting list, with about 800 homeless cases being presented every year.
The proportion of private rented property in the district’s entire housing stock is just 5 per cent, which highlights the difficulties the council has in finding available properties to house people in housing need.
A Midlothian Council spokesman said: “The council is very aware of increased numbers of those seeking housing and the waiting times involved. We are confident that PSL will have a major impact in alleviating these issues.”
Angela McLachlan, head of social housing Scotland for Orchard & Shipman, said: “Signing up our first batch of landlords and tenants so soon is a major landmark for PSL in Midlothian.
“The scheme works because it benefits the council, the people desperate for quality accommodation and private landlords, who see the benefits of long-term income.”
Poverty ‘blights 1m rural homes’
Almost one million households in rural England live in poverty, a study says.
The report, by the government’s rural advocate, Stuart Burgess, says many people living and working in the countryside have prosperous lifestyles.
But the picture is “not so rosy” for more than 928,000 households with incomes below the official poverty line of £16,492, he adds.
It comes as the Rural Services Network warns little has been done to tackle longstanding rural problems.
Dr Burgess, who heads the Commission for Rural Communities, said: “Many people who live and work in rural England can enjoy a relatively healthy and prosperous lifestyle.
“However, the picture is not so rosy for all.
“A significant number of rural people are unable to share in this high quality of life, with over 928,000 rural households with incomes below the official poverty threshold.”
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