marylsommers: First-time buyer mortgage deals 'set to rise'

Saturday, January 21, 2012

First-time buyer mortgage deals 'set to rise'

Trends in Lending report says lenders expect the availability of secured credit to households will increase in the first three months of 2012

First-time buyers could benefit from a rise in the number of available mortgages in the first three months of 2012, according to the Bank of England.

Its latest Trends in Lending report says "lenders expect the availability of secured credit to households to increase slightly in 2012 Q1, with the rise concentrated on borrowers with high LTV [loan-to-value] ratios".

This could provide a lifeline to would-be homeowners stuck in expensive rental property, along with the �3bn HSBC has pledged to lend to first-time buyers.

Despite rents in England and Wales falling for the second month running in December 2011, with a 0.8% decrease taking the average rental price to �711 a month, prices remain 4% higher than they were a year ago, according to LSL Property Services' buy-to-let index.

During December rents fell in seven of the 10 regions monitored by LSL, with the biggest declines in the south-east and north-east, where rents dropped by a respective 1.9% and 1.4%. London rent fell for the first time since December 2010, decreasing by 0.9% in December 2011, although they remain high at an average �1,023 a month.

Persistently steep rents, along with the added Christmas expense, resulted in tenant finances deteriorating in December, with 10.7% of all rent late or unpaid by the end of the month compared to 9.3% in November.

Tim Hyatt, president of the Association of Residential Letting Agents (ARLA), said: "With household income decreasing and job uncertainty prevailing, it could be that increasing rental arrears is a sign that the wider economic malaise is having a tangible impact on personal finance ? some consumers may have reached the limit of their access to finance, while others may be cutting back as many commentators have predicted."

Hyatt said an easing in demand for rental property, along with a rise in the numbers of tenants struggling to meet their monthly rent payments, pointed to a softening in the rental market.

A separate survey by FindaProperty.com indicated that rental asking prices fell 3.3% in the last three months of 2011 due to an increase in supply.

It said the stock of rental properties was currently at its highest point since 2009, which led to a December fall in asking prices of 1.1%, bringing the monthly average asking price to �861.

FindaProperty said the increase in available rental stock, along with falling rental prices, "will provide much-needed respite for renters in 2012 after a challenging year where asking prices hit record highs of �890 in September."

However, David Newnes, director of LSL Property Services, suggested the respite could be temporary. "With the mortgage market facing challenges from the eurozone crisis and the sluggish wider economy, credit conditions are unlikely to ease significantly in the coming year," he said.

"As a result, the number of first-time buyers able to secure finance isn't about to rocket up, and demand for the limited supply of rental accommodation will continue to rise. It won't be long before rents will resume their upward march."

In its Trends in Lending report, the Bank of England said lenders were expecting a "slight fall in demand for secured lending for house purchases and buy-to-let properties in the next three months".

But some lenders believe the buy-to-let industry, blamed by some for causing the property crash, will take off in 2012.

The Co-operative Bank is to offer �600m of buy-to-let loans this year through its intermediary arm Platform, with business development director Lee Gladwell claiming: "Uncertainty around the economy, employment and house prices is continuing to fuel demand for the rental market and creating opportunities for landlords and brokers."

Mark King