Spring sunshine and an easing of Brexit tensions provide reasons to be cheerful for the industry, despite seismic shifts in the buy-to-let space
The glorious weather over the Easter sojourn we have had usually does wonders for the property market. There is something about sunshine that makes people want to not just dust off their barbecues, but to move or put their properties on the market.
Couple this with a welcome Brexit hiatus and we could be in for a busier-than-expected time over the next three months.
It is amazing how much happier people have been with the House of Commons in recess, although the upcoming European elections and the politics of hate coming from some of the candidates will no doubt raise blood pressure levels again.
In the meantime, with delay after delay, a growing number of people are saying ‘to hell’ with Brexit and getting on with their lives.
There is a significant amount of pent-up demand out there and we are now starting to see this come through. This is especially the case with first-time buyers, who sense the current uncertainty is a massive window of opportunity to get on the ladder.
Not only are house prices more attractive than they have been for a while, but FTBs are being accommodated by Help to Buy, competitive mortgage rates and reduced competition from amateur landlords following recent tax changes. According to UK Finance, mortgage lending was up 9.1 per cent on March last year, although it should be remembered that last March was particularly slow.
What is also interesting is that the value of these increased approvals, £2bn, was actually lower than this time last year.
Remortgages are the other area of strength in the lending sector, up 11 per cent, which is no surprise given the competitive products and rates available as lenders seek to boost market share. This is something that is expected to increase and reach a peak in October this year, according to research from Moneyfacts.
Latest figures in the buy-to-let market echo the marked changes we have all seen in this area, with UK Finance reporting that 4,800 loans were taken out in February this year, down from 16,000 in the heady days of 2007. Only a quarter of these were taken out by amateur landlords. This shows a seismic shift over the past couple of years, with the BTL market being supported by professional landlords who have the scale and efficiency to cope with tax changes.
You Know What Really Grinds My Gears?
I read an excellent article last week by Leah Milner around mental health and money.
It is something many people do not even think about, especially in the high-pressured sales environment of finance. For the most part, our industry deals pretty well with the clients we act for, trying our best to reassure, counsel and support them through the tumultuous home-buying process.
Unfortunately, we often seem to fail when dealing with those of us who work within it.
We take on the stresses of clients, take their calls at all hours and work late. We neglect our families and, according to some of the brokers I have spoken to, are managed to within an inch of our lives to hit ever-increasing targets. Do not get me wrong; within any business it is important to have targets and reward over-achievers, but we must recognise the signs of stress and ensure life is balanced. And if I hear the words ‘man up’ said again to anyone… It is OK to not be OK, and all of us have to look out for each other.
The amateur landlords we see now are people buying out relatives from inherited properties and wealthy individuals who are making a long-term property investment for their children or pension, and do not mind not making much profit in the meantime. As with anything, there has to be balance in the market (just ask Thanos all about that if you have seen the latest Avengers instalment), and we have to be careful that tenants do not suffer with fewer places to rent and higher rental costs.
All of this has other effects too, with stamp duty receipts reportedly falling by £1bn – a big drop. Lower transaction levels are, of course, behind this, though as expected, the capital gains tax take from property has increased as more people sell second homes. Property transactions look to be pretty flat, as they stick at around the 100,000 level.
Talking of stamp duty, the House of Lords committee on intergenerational fairness is the latest group to call for a wholesale review of the troubled tax, arguing it “has seriously distorted the market”. Anyone for transferring this liability from the buyer to the seller?
Meanwhile, in the markets, three-month Libor has remained consistent at 0.83 per cent, while swap rates have risen a bit, probably based on the fact a Brexit deal is more likely (ha, or no Brexit, of course!).
● 2-year money is up 0.08 per cent at 1.03 per cent
● 3-year money is up 0.11 per cent at 1.09 per cent
● 5-year money is up 0.13 per cent at 1.18 per cent
● 10-year money is up 0.15 per cent at 1.34 per cent
Given the issues raised by many of us about the FCA’s latest Mortgage Market Study, it was good to see a response from the regulator, reiterating that some of the comments made about brokers were not intended to be taken that way, and brokers have a very important part to play in the future.
It did reiterate its stance that advice should not stand in the way of innovation for consumers, and that those who want execution-only should be allowed to have that.
We need to all make sure we offer a fair choice and proper information for consumers to be able to take that decision.
It was also interesting to see the views of the Association of Mortgage Intermediaries in its always excellent Quarterly Economic Bulletin. Particularly interesting was the comment “there is too much money chasing too little return in today’s market”. This “margin compression” is causing issues for some.
That said, the rates on offer at present have improved again, with the excellent Halifax leading the field in the residential space. It has a whole range of highly competitive products, and still manages to offer excellent service and a broad spread of underwriting criteria. Consistency has always been its mantra. It has also made some improvements to affordability criteria and loan-to-income caps, which have been echoed by Scottish Widows.
Barclays and Santander are still following closely behind with their own rate changes, while the ever-improving HSBC is snapping at everybody’s heels.
The specialist market is an ever-changing feast at the moment, with Aldermore making a range of really good changes, including increasing the term length, raising the LTI ratio, lending up to £1m, ignoring all communication defaults and amending recognised property types.
It was also really good to see the return to the market of Fleet Mortgages after its brief ‘rest’. Welcome back to the madness.