Number of purchases increase in the Buy to Let mortgage market

Mortgages For Business has released its quarterly analysis of Buy To Let mortgages transactions for Q3 2009. There has been a shift towards purchase transactions away from remortgages with 77% of applications being for acquisitions against 65% in Q2. This trend has been maintained in transactions received thus far in October at 76%.

These figures have been matched by increased levels of business activity across the whole spectrum of property types. Funding for HMOs, freeholds with multiple flats and studios is becoming more available and Allsop’s Residential Auction on Thursday 29 October is packed with investment properties on attractive yields. Interestingly Allsops have commented that their auctions at this time last year consisted of nearly 80% distressed sales but this figure is now significantly lower. Having obtained decision in principle mortgage offers for several clients intending to bid on some of the 277 lots to be auctioned, logging onto their “live auction” web page could make for an interesting day.

If the start of the property production line is deemed to be “Greenfield” development or conversion of existing properties to create more flats, then the only real constraint to a market revival is the availability of property development finance. We are getting three enquiries a day from small to medium sized developers looking for funding between £500K and £5M – and two of the High Street banks have no development appetite whatsoever. Those remaining lenders are able to set robust terms as their own funding lines cannot be readily expanded in the short term.

SMEs are also active on both refinancing and acquisition. The former are driven by their incumbent banks imposing tougher terms on facility renewal and the latter are seeking more competitive terms on purchases as banks struggle to improve the weighting margin on their commercial mortgages. Understandably this is not a market wide problem so the recently more confident stance of the Santander brands is a welcome addition to the market.

As a whole of market broker we are seeing some quiet confidence amongst clients that the property market is stabilising; none of them expect or want significant growth in the short term but a lack of consistency from some lenders is a big break on market activity.

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