The biggest threat to buy-to-let is none of the existing changes but any further interference from the powers that be
Another rather unexciting Bank base rate announcement came and went last week. But while the decision itself was a foregone conclusion, this was always going to be about the minutes and their tone.
Given current global issues, particularly China and the free-falling oil price, as well as some poor manufacturing figures and downward revisions to UK GDP, it seems inflationary prospects will continue to be weak.
This has led to many predicting the date of a future rate rise will be pushed out further, instead of rushing to follow the US.
The question now is, will there be any rate rise this year at all?
As we have seen, especially with Bank of England governor Mark Carney, things can change quickly and the tone of the Monetary Policy Committee members will be examined closely over the next few weeks.
In the markets, three-month Libor is at 0.59 per cent while swap rates have slipped further.
2-year money is down 0.05% at 0.92%
3-year money is down 0.07% at 1.07%
5-year money is down 0.08% at 1.34%
10-year money is down 0.04% at 1.78%
So what about the mortgage industry? Well, despite the above factors, we still look set to have a good year, building on the hard work of 2015. In fact, there are many opportunities for both brokers and lenders.
The first quarter will no doubt be all about the buy-to-let market, with many buyers looking at getting things done and dusted before the additional stamp duty changes come in. With that so imminent, though, it seems crazy that we are still waiting for the final rules to be communicated.
At present it looks like let-to-buy could be decimated, which I guess will free up more properties for others. However, the fact parents may have difficulties in helping their children get on the housing ladder is a real shame.
So while the amateur landlord will become scarcer, it seems that, as far as professional landlords are concerned, it will be business as usual. Lenders that want to play seriously in this market will need to come up with different products, such as more lending to limited companies.
We have already seen buy-to-let rate reductions from the likes of Axis Bank, Fleet, Precise, Shawbrook and Virgin Money, while Aldermore has decided to make its specialist buy-to-let range the same as its standard range, which involves some big cuts. Is there any real reason why lending to limited companies should be that much more expensive than lending to individuals?
The biggest threat to buy-to-let, however, is none of the existing changes but further potential interference from the powers that be, especially if they compel lenders to set a higher rental stress test at, say, 7 per cent. TSB is the latest lender to up its buy-to-let rental calculation to 5.5 per cent above 65 per cent loan-to-value.
Here, I support the latest comments from the Council of Mortgage Lenders that said: “To promote greater competition in the future, the mortgage market would now benefit from a period of stability, without any significant regulatory intervention for a while.”
Meanwhile in the mainstream market, lenders with challenging targets must make use of the opportunities. Remortgages should grow further this year and lenders that do not develop a broker-friendly retention proposition will start to lose out.
Developing more user-friendly policies around interest-only, lending to the self-employed, contractors and older age groups, as well as offset mortgages will all help far more than aimlessly reducing rates.
New-build is also a massive opportunity. It is all very well the Government championing building but lenders need to do their bit too, looking carefully at things such as assignable contracts, which in my view can be done in a fully transparent manner. London Help to Buy is a boon on that front and I expect to see more lenders offering products here soon.
So expect a busy but interesting year. Lenders – keep talking to brokers about what our clients really need. And brokers – treat lenders nicely.
Andrew Montlake is director at Coreco