80% Loan-to-value Buy-to-let mortgages are back

The Mortgage Works have launched a new range of buy-to-let mortgage products which include 80% loan-to-value products at very competitive rates.

This is very positive news for the buy-to-let sector as this is the first mainstream lender to offer 80% finance in over a year.

Highlights include;

  • 80% LTV, 4.69% until 31.07.2011, thereafter 4.99% (variable) 5.4% APR, 2.5% arrangement
  • 80% LTV, 5.69% until 31.07.2011, thereafter 4.99% (variable) 5.4% APR, 1.5% arrangement
  • 80% LTV, 5.99% until 31.07.2011, thereafter 4.99% (variable) 5.4% APR, £1,795 arrangement
  • 80% LTV, 5.49% until 31.01.2012, thereafter 4.99% (variable) 5.5% APR, 2.5% arrangement
  • 80% LTV, 5.99% until 31.07.2012, thereafter 4.99% (variable) 5.7% APR, 2.5% arrangement
  • 80% LTV, 5.99% until 31.07.2013, thereafter 4.99% (variable) 5.8% APR, 3% arrangement

Many of the brokers we speak to on a daily basis believe that other mainstream lenders such as BM and C&G will follow suit shortly and introduce an 80% LTV product to remain competitive.

*PLEASE NOTE: these are a guide and accurate as of 20/05/2010. Terms & conditions attached to the loans vary and for full information you should contact the Mortgage Works Direct or call the office and we will put you in touch with our recommended mortgage broker.

Mortgage Works Launch New ‘Investor Friendly’ Mortgage Range

The Mortgage Works will tomorrow be launching a new set of products geared towards helping landlords finance deals that in modern times most mainstream buy-to-let lenders have shied away from. These include houses in multiple occupation (HMO) and a range of buy to let tracker mortgages which allow borrowers to switch on to a fixed rate at any time without incurring an early repayment penalty.

The new range being introduced tomorrow will also include buy-to-let mortgages for Limited Companies as well as changes to buy-to-let, let-to-buy and light refurbishment products. Some existing products will see rates improved by nearly 0.3%.

The Mortgage Works head of Products, Tracy Pearce commented,

‘The Mortgage Works is committed to considering the challenges that landlords face now and in the future and continually looks for ways to offer them greater choice and common sense alternatives. The HMO, Limited Company and Switch to Fix propositions are designed to give customers flexibility over their borrowing, which means giving them more control and more chance of finding the perfect product for their needs.’

Our experiences with the Mortgage Works have been very positive since the start of the credit crunch, which can rarely be said for many of the other lenders out there. Their application process is relatively simple and their behaviour is generally consistent across the board and over time. If this remains true with the introduction of these new products then this should open the door for many investors to prosper, in particular with the HMO products being introduced.

Finance Update From Mortgage BTL

Landlord confidence grows in buy-to-let market

A majority (64%) of UK landlords feel more confident about the buy-to-let market as 2010 begins, according to the latest rental confidence index from Upad. The figure represents a 6% increase from the same survey in December. (Mortgage Solutions 13/1)

Landlords enjoy a much healthier 2009

Landlords enjoyed a 7.6% annual return on their investments by the end of December 2009, according to the latest index from LSL Property Services. The value of their properties rose 3% in the year while rental income added a further 4.6%. This means in 2009, a typical landlord made a return of £12,740. By contrast, in 2008, a typical landlord would have lost 8.8% or £15,100. Arrears performed very well in 2009. On average 11.7% of rent was unpaid by the date it was due, down from 14.5% in 2008.
(Mortgage Solutions 15/1)


Why many landlords that bought in the peak of 2007 are suddenly finding themselves in a strong position

Since the peak and start of the subsequent property market crash in mid 2007, we have all heard horror stories from and about investors who were buying multiple investment properties in the few years preceding 2007. I’m talking about those who caught buy-to-let fever; which seemed to grip the UK after a decade of consistent capital growth and ‘easy’ lending. Those who bought plenty of property that was ‘washing its’ face’ so to speak and only covering costs in the good times; but then fell in value by 20% when the market fell, leaving these investors in negative equity. Many investors who started buying investment property 3-4 years ago thought they would struggle to survive when the crash commenced – with some investors facing 100’s of thousands of pounds of negative equity and cash-flow that was neutral at best.

What we have seen since has turned many of these investor’s situations around completely. Now many of these investors are still in negative equity which is a given, but they are not overly concerned because their cash-flow neutral portfolio is suddenly producing a healthy profit each month. Take the following example:

Investor takes out £100,000 mortgage which tracks at .05% below base rate in July 07. At this point, the base rate was 5.75% so his mortgage had repayments of £5,250 per annum or £437.50 per month. Many investors were happy to buy property at the time with a rental income of £530 per month which, after management, insurance and contingency buffer would just cover monthly mortgage payments. They were happy to buy this way as cash-flow was not as imperative to them as the capital growth they anticipated based on previous years.

So when the market started to drop midway through 2007, many investors who had bought property in the previous couple of years started to panic. Until of course the base rate started to drop… When the interest rate hit 1.5% in January 2009 the investor in the above example was paying just 1% per annum on his money – just £1,000 per year or £83 per month against a rent of £530 per month. When rates continued to slump to just half a percent in March of the same year, many mortgages went down to literally zero! I have seen many a copy of a framed letter from lenders stating ‘The New Monthly Payment on your Mortgage is Zero’ hung on a proud investor’s wall!

Many other investors took out two & three year fixes before the market started to dip in 2007. These were typically fixed around the 5% mark, and once out of their fixed period, reverted to the lenders reversionary rates which were set at the time to track the base rate. A few years back for example, Mortgage Express had a reversionary rate of 1.75% above base rate. Many investors are reaping the benefits of this reversionary rate today. Offer money to investors looking to buy property today at this sort of rate and they will snap your hand off! If the investor in the above example had been on a 2 year fixed tracker in 2007, he would now see his mortgage down at £2,250 per annum or £187.50 per month versus rental income of £530. With cash-flow currently this strong and still on a tracker rate that far more attractive than any currently on the market, being in negative equity suddenly doesn’t seem so daunting.

A common saying I hear from investors and industry contacts alike is that, ‘You make your money in this game when you buy – not when you sell.’ IE you must be buying at well below market value in the first place to prosper from a market value sale at some point in the future. This has elements of truth – of course it helps to buy below market value, but it is not the be all and end all of successful investment in property. If you bought at 15% below market value in the peak of 2007 it wouldn’t help matters much if the market dropped 20% overnight!

A combination of buying below market value, with strong monthly cash-flow, and the ability to take a medium to long term view with property is key for success. It’s imperative to take a medium to long term view, as history shows, you will always prosper over the long run if investing sensibly. The market throws up surprises as we have seen a few times now – no one predicted interest rates would rise to 15% in the late eighties, nor did they see them falling to their current level of half a percent. Whichever market you are in however, hold tight for the medium to long term and you will generally do very well.

Now is as good a time to buy as ever – you will probably never be able to pick up deals at genuine discounts of 20%+ below today’s low market value for many years to come. If your cash-flow is strong and resilient to interest rate fluctuations and you can sit on these types of deals for the next sustained period of capital growth, you really can use today’s market to build good levels of income and genuine equity.

View our Current Deals & Example Deals

Property Prices Continued to Rise in November

The latest Nationwide survey shows that house prices in the UK have risen for the seventh consecutive month.  The average value increased by 0.5% in November, surprising many observers as the pre-christmas period is usually sluggish for the property market. The latest figures reveal that the demand for housing is buoyant and considerably more resilient to macro-economic conditions than many experts intially thought.

Having been at forefront of the property industry, this reinforces Alpha Property Investment’s belief that movements in the housing market tend to be  the harbingers of the wider economic environment. Although the UK economy is still in a worrying state (notably in terms of unemployment , GDP growth, and a ballooning national debt),  the green shoots in the property market are indicative of a modest, yet sustained economic recovery.  Credit flows seem to be up-and-running again, thereby enabling mortgage lenders to ease their criteria and provide house-buyers with the financing facilities indispensable to maintain a healthy, wide-based demand in the property market. This could well be a self-reinforcing trend as lower interest loans helps consumers free up funds they can now spend on other goods and services, thereby spurring wider economic growth.

UK house prices 12-09