Assetz® News - Less interesting mortgages

Less interesting mortgages

15th January 2009 |

The last few months have brought about a number of reductions to mortgage costs, at a time when the Bank of England has been slashing the base rate to unprecedented low levels. For some this has meant a chance to enjoy lower payments on their current mortgage (particularly tracker customers), while others have been able to obtain finance for less than before.

New figures from the Council of Mortgage Lenders (CML) revealed today the extent to which lower costs have trimmed the burden on incomes. Home movers in November 2008 paid about 14.4 per cent of their earnings each month, the lowest proportion since April 2006, while the share for first-time buyers has been at its for 21 months, amounting 18.2 per cent. It may also be noted that the ratio of mortgage size to income for first-time buyers fell to 3.07, the lowest figure since September 2005.

For those investing in buy-to-let, however, any analysis of the implications of these figures must be taken in context. In this case, the CML statistics revealed two more facts about first-time buyers. One was the actual number of mortgages granted to those taking their first steps on the ladder, which was down from a total of 15,400 worth £1.8 billion in October 2008 to 12,400 worth £1.4 billion in November. Furthermore, the average deposit size required of first-time buyers was 18 per cent, the largest recorded by the CML in 35 years of available data.

Therefore, while those new entrants to the market who are able to put together a deposit and get accepted for a mortgage are now finding this costing them less, the initial requirements may be causing fewer of them to benefit, to which can be added those who may decide that the current economic climate is not the best time to try.

Such factors could provide more opportunities for buy-to-let investors. A lower number of first-time buyers means more having to make alternative arrangements, something that can may benefit rental landlords.

Of course, those keen on investing in more property to take advantage of such possibilities may be hoping that it is not mortgages for owner-occupiers that are falling. Today an announcement by buy-to-let mortgages provider The Mortgage Works may have produced such cause for optimism. It has announced a new range of buy-to-let deals at revised rates (including a 0.5 per cent cut to its tracker deals), with managing director Andy McQueen commenting: "The availability of a one-year tracker-rate buy-to-let product at 3.49 per cent is evidence that some borrowers could benefit from variable-rate deals in the current environment. For landlords who prefer to fix their payments, the reduction in pay rates on our five-year fixed-rate products may prove attractive."

So for those investing in buy-to-let, it could be that mortgages for this purpose are now on the way down, providing a benefit for those who can then use the property they acquire to provide accommodation for those who find getting their first mortgage somewhat harder.