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.

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)


Fixed or Tracker Buy-to-let Mortgages for 2010?

Ah – the eternal investor’s dilemma is as relevant as ever. With the Bank of England (BoE) base rate steadily nailed at 0.5%, one would expect tracker mortgages to be hovering at 2- 3% and fixed rate ones around the 4% mark. Yet they’re not. At 75% loan-to-value, we struggle to get below 4.5% on trackers and 5 – 5.5% on fixed.  This makes for a tough call.

Going on a tracker produces a better cash-flow, but one vulnerable to rate hikes, which seem increasingly likely as we recover from the crisis. There certainly isn’t much leeway for further rate cuts…  For the sake of 0.5% or 1% difference, it is tempting to fix a rate, lock in a respectable return, and put our minds to rest.

Yet although we are soldiering our way up the road of recovery, interest rates are probably going to remain below 1% until the tail-end of the year, if not longer. The BoE is considering phasing out its some of its crisis policies such quantitative easing (i.e injecting money into the economy), but the requisite for low interest rates remains essential to revitalise consumption, business lending as well as the property sector.

So where does that leave us? It is obviously a matter of personal preference but we tend to recommend 1 year trackers around 4.3% at the moment as this is worthwhile as long as the base rate stays round 0.5-1% for the next 8 months or so. Even if it rises to say 1.5% towards the end of the year, the savings made on the repayments until then will more than compensate for the later ones, as the average yearly repayment is still lower than that of fixed rate mortgages. Another advantage is that going on a 1 year product avoids paying an early repayment charge (typically 2.5 – 5%) should you decide to sell or refinance in 2011.

Our conclusion is that for 1 year products, tracker rates at least 0.5% lower than fixed rates look like the more appealing proposition at present.

For investors wishing to sit on a property for over 18 months are probably better off fixing the rate to stabilise the cash-flow whilst plotting their next move.

Implementing a Profitable Property Investment Strategy

Before investing in property, it is fundamental to set out a strategy congruent with your financial objectives. These aims depend on your individual circumstances. If you are looking to consolidate your income, cashflow is essential (rental income – costs). If your primary aim is to profit from the re-sale of property, then the key will be to invest in areas with good capital growth prospects and buying at prices below that of local comparable properties.

Here is a breakdown of the two elements which invariably form the cornerstone of any investment strategy:

Buying at a Discount

The discount on a property is the difference between the purchase price and the value of the property, usually based on a Royal Institute of Chartered Surveyors (RICS) valuation. The discount is an essential factor as it represents instant equity and, crucially, enables to drastically reduce the capital input when the right deal structure is in place. In current market conditions discounts typically range between 15 and 30%, depending on the number of units for sale and the motivation of the vendor.

Using Appropriate Finance

Finance is the backbone of the great majority of property deals. The most important components of a mortgage are the loan-to-value (LTV) ratio and the type and level of its interest rate (tracker, fixed…etc). A higher LTV reduces capital input (thanks to a larger loan amount) but decreases the cashflow (due to higher mortgage repayments). A lower LTV boosts the cashflow but raises the initial capital input.

Result: A High Return on Investment

  • Low capital input
  • Ongoing positive cashflow
  • Instant equity
  • Long-term capital growth prospects

A successful investment strategy generally entails buying properties below market value using financing options striking the right balance between initial capital input and ongoing cashflow. A well-structured portfolio provides a constant income stream as well as long-term capital growth prospects.

We wish you successful investing in 2009!

Alpha Property Investment Ltd

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Market Views from Mortgage Btl Ltd

Going forward into 2010 I expect to see more products, less stringent criteria and an ease of LTV’s. Enquiries for buy-to-let mortgages have increased by nearly 50% since August 2008, whilst available products have diminished, but lenders realise this demand and we are starting to move forward.

As an experienced broker I have some very good internal contacts within the industry and I’m certainly hearing good things from many of my business development managers. Many of whom have been helping brokers like myself for 30 years or more. Lenders like The Mortgage Works, I expect to see them return to niche areas of the market in 2010 such as House in Multiple Occupation and 75% LTV lending. Their motto has always been ‘common sense lending’ and it certainly would be good business sense to carry out these changes as it will increase the much-needed competition in the market place.

Interest Rates 2010

We get many lender reports at this time of year from senior economists. A Nationwide report this month has revealed that most senior economists expect the Bank of England base rate to remain low throughout the majority of 2010 until Q3 when we should expect interest rates to reach 1.0%. You can read more about how interest rates will move into 2011 and 2012 by visiting our website.

BTL rental demand to rise

The residential rental market is beginning to stabilise with property oversupply decreasing across the UK and the number of new tenancies increasing, according to the Association of Residential Letting Agents (ARLA). It says that the historical decline in numbers of tenants, which led to a surplus of properties to rent, is coming to an end.

The research also showed that the average void period of a rental home has dropped for the first time in more than a year, indicating that properties are being rented more quickly (ARLA 29/9)

All in all, very positive news and a good outlook for investors. I firmly believe we have only a timescale of 6 months left to secure decent below market value property before the market starts to rise again. Successful investors will take advantage of this, buy now and sell when the market rises.

from mortgagebtl.co.uk