Tracker Mortgages fall while Fixed Rates Increase - November 2010

Buy-to-Let  -  Rental Demand Hits Eight-Year High
The number of tenants looking to rent has reached an eight-year high as demand far exceeds supply, according to the Association of Residential Lettings Agents (ARLA).  ARLA said that levels of demand are the highest it has recorded since its survey began nearly a decade ago and are more than double the figures seen at the peak of the market in 2007. Ian Potter, operations director of ARLA, said: "The market has bounced back in a way that no one could have predicted to levels of demand that have not been seen since the last century.

Meanwhile Countrywide also say that tenant demand reached new highs in the third quarter of 2010. The letting agent said it saw more than 61,000 new tenants registering for rental accommodation during the period - a 19% increase on the quarter two. It takes the total rise in people looking to rent in 2010 to 44%. However, availability has fallen, meaning on average 5.8 tenants are vying for each rental property. John Hards, co-managing director of Countrywide Residential Lettings, says: "The private rental sector is the only viable option for a growing number of people and this issue will only intensify, especially in the wake of the government's cuts to the social housing budget."

With Paragon re-entering the buy-to-let mortgage market, the number of schemes now available to new and existing landlords has increased to give greater scope to increase the supply of rental properties.

All the economic indicators point to the demand for rental properties continuing to rise so it is worth looking at some of the features of schemes that are currently on offer:

• No employment income required - affordability judged solely upon rental income.
• Up to 80% loan-to-value accepted.
• If you want to let your existing property and move, the mortgage on your existing property can be ignored in the affordability calculation for your new mortgage as long as the monthly repayments are covered by the rent.
• Refurbishment mortgages which allow you to make older properties habitable.

Market News and Comment
Market interest rates had remained steady since the last newsletter, until last week when we saw sharp rises across all terms. So, since the last news letter rates have increased as follows:
1-year money is up 0.11% at 0.95%
2-year money is up 0.22% at 1.50%
3-year money is up 0.26% at 1.81%
5-year money is up 0.27% at 2.37%

3-month Libor has increased slightly to 0.74%
With fixed rates as low as they've ever been, there has never been a better time to switch out of your lender's standard variable rate (SVR) scheme and into the shelter of a fixed rate.  If you feel that the recent rises in market rates is signalling the end of the low-rate era, then now may be the time to change. Some lenders are offering 5-year fixed rates at less than 4% and I don't think it can get much better than that!

Lender News
Northern Rock are reducing selected Everyday rates by up to 0.60%:

• New purchase and remortgage product ranges launched
• Everyday 2 Year Fixed rates for purchase borrowers now start from 2.88% with a £995 fee up to 70% LTV
• Everyday 2 Year Trackers for purchase borrowers now start from 2.59% with a £995 fee up to 70% LTV
• Everyday 2 Year Fixed rates for remortgage borrowers now start from 2.98% with a £995 fee up to 70% LTV
• Further reductions across selected 3 Year Fixed and 5 Year Fixed rate

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The Mortgage Works has introduced a new range of products , headlines as follows:

• Extended range of remortgage products, with £595 arrangement fee options, free standard valuation & free standard legals.
• Headline rate improvements of up to 0.15% for fixed & tracker products; tracker rates starting from 1.99% (BBR + 1.49%).
• Expanded range of Stepped Trackers including new 85% LTV option.
• New 2 year fixed rate purchase only product at 4.98%, no arrangement fee, up to 85% LTV, £250 cashback and free standard valuation.
• New 2 year fixed rate product at 3.99%, £1,295 arrangement fee, up to 75% LTV and with £1,000 cashback.
• New 5 year fixed rate products with rates starting from 4.24%

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Santander is reducing rates by up to 0.20%, some new rates are as follows:

• 2 year Fixed rate Homebuyer product, 70% LTV, 3.05% with a £995 fee
• 2 year Fixed rate Remortgage product 75% LTV, 3.64% with a £995 fee
• 3 year Fixed rate Remortgage product, 70% LTV, 3.87% with a £995 fee
• 2 year Tracker Homebuyer product, 70% LTV, 2.58% (BBR + 2.08%) with a £995 fee