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Implications for buy-to-let

9th January 2009 | back to article listings BACK    print this article PRINT

With the Bank of England's monetary policy committee setting new records yesterday by cutting the base rate to an unprecedented low of 1.5 per cent, attention will inevitably be focused on how this will affect the property sector.

A particular concern will be how lenders respond in terms of setting interest rates on their mortgages. For those who are keen to see a boost for the market, it is important that these are passed on in full, but many have doubted that will happen. For instance, financial services director of property firm Kinleigh Folkard & Hayward John Phillips said: "Lenders are likely to drop their rates by only 0.1 or 0.2 per cent."

So far, a mixed picture has emerged. Halifax, for example, has said it is passing on the cut in full for trackers, a pledge Abbey has also made. But Halifax also stated it is only lowering its standard variable rate (SVR) by 0.25 per cent, while Abbey has said its SVR is under review - along with its tracker rate for new customers.

Such a response may put a question mark against hopes that the market will be boosted as much by the rate cut as some hope. While investors who can get better deals will gain, any lack of benefits for some existing customers, refusal by lenders to make a lot more favourable deals available and any continued difficulty in obtaining credit - such as a persistence of high deposit requirements - may all hold back a revival.

One outcome of this that may benefit investors is a persistence of the recent trend for high demand in the rental market from those unable to get on the housing ladder.

Much may end up depending on whether the government can make good on its previous pledge to get the lenders providing funds. Commenting on the significance of this, David Bexon, the chief executive of Smartnewhomes.com, said: "Going forward in 2009, we need to see government measures put into practice that will stimulate the banks' willingness to lend." Without this, he said, rate cuts will mean little.

Other ideas have been suggested as well. National Association of Estate Agents chief executive Peter Bolton King said a suspension of stamp duty would help.

The challenge of getting more lending going in a recession could be a hard one. For those investing in buy-to-let, the prospect may be in the case of a continued lack of finance that those who can invest or are existing landlords will capitalise on the high level of rental demand this will bring.

On the other hand, if the year starts to bring better times ahead, more lending and more transactions, investors may not only find their own access to finance increasing, but also see the prospect of an increase in prices too.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/4572.html. Alternatively, please see our full press release archive.

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