October 2010 Property Investors Factsheet (free membership required)

As it was decided that the UK bank base rate will remain at 0.5 percent, further disagreement was seen amongst Monetary Policy Committee members – not only from Andrew Sentance (who has called for a 0.25 percent increase for some time) but also Adam Posen, an internationally respected expert on Japan’s ‘lost decade’, suggested that more, not less, monetary stimulus was needed: “it is right for both long-term stability and short-term performance for central banks to do more now…”

Halifax’s September report of a 3.6 percent monthly drop as a ‘beginning of a sustained period of declining house prices’ was described by Howard Archer of Global insight as ’shocking’: “while a drop in house prices always seemed probable in September after Halifax had reported price rises in August and July that conflicted with other surveys, a plunge of of this size was off everybody’s radar.”  The RICS Housing Survey this month also showed only 7 percent of surveyors seeing a rise in prices (compared to last months 11 percent) and 38 percent seeing falls (compared to 25 percent last month).  A survey by Zoopla reported that homeowner confidence had fallen amid concerns over the availability of mortgage finance:  63 percent of homeowners now expect property prices to rise over the next six months, compared to 78 percent of homeowners in June.  However, positive news for property investors was announced by ARLA (Association of Residential Lettings Agents) that the number of tenants seeking rental properties has reached an eight year high – demand is highest in the south east of England where 81 percent of agents reported that there are more tenants than properties compared to 67 percent in the rest of the UK and 73 percent in Central London.  A Markit / CIPS survey of construction industry purchasing managers showed an unexpected pick in the level of activity – although doubts remained as to how demand will fare in the next few months.

The lending markets have also seen some encouraging signs with Legal & General (in its third quarter adviser confidence index) reporting that 85 percent of advisers predicting that business will improve or at least stay the same over the next 3 months despite the current undertone of negativity.  Buy to let product wise, the Mortgage Works (TMW) have positively revised their product range – sending us the following information:

• New one and two-year tracker mortgages at 70 percent LTV, with rates starting at 3.39 percent;
• A two-year fixed rate option with 0 percent arrangement fee now available at up to 70 percent LTV;
• The expansion of the longer term product range with the introduction of a four-year fixed rate (up to 75 percent LTV) and a five-year fixed rate (up to 80 percent LTV);
• The introduction of a £1,000 cashback option for HMO applications;

… as well as some enhancements to the buy to let range including:

• One-year fixed and tracker remortgages options at 70 percent LTV, now available at 3.99 percent, with free standard valuation and standard legal fees;
• Tracker rates improved by up to 0.15 percent across the range;
• A free standard valuation option available for house purchase customers when they select: TMW’s two-year fixed rate mortgage at 60 percent LTV with a 0 percent arrangement fee;
• Significant rate improvements across all HMO and Limited Company products.

The Bank of China have continued to seek a wider share of the UK buy-to-let market with a 1 year 75 percent LTV product with a 4.1 percent payrate.  Cuts have also been seen in the broader residential lending – for example by HSBC (with a reduction of 0.4 percent on all its 80 percent LTV mortgage products) and Lloyds TSB (with the introduction of a 70 percent LTV fixed rate with interest at 3.39 percent).

In related news, despite marginal growth last month, a survey of 400 agencies by the Recruitment and Employment Confederation (REC) and KPMG pointed to an increased risk of a ‘double dip’.  Kevin Green, the REC’s chief executive, stated to the FT: “I think the labour market is in for a real bumpy ride – unemployment, currently 2.47m or 7.8 percent of the workforce, could rise again to 2.7m by the middle of next year.”