A Rising Market

Forget Predictions. Investors want hard facts. I met with a Mortgage Broker in Ashford yesterday. He told me he is doing wonderfully well with mortgages for “owner occupiers” but had not done a Buy To Let Mortgage for over a year!

He put this down to the fact that most of his business is at the top of the range with “New Build” Mortgages funded by an Off Plan mortgage product. The prices are at the top of the range which makes it rather unattractive to BTL investors searching for a competitive yield.

The feedback I have from the sale of my properties as part of my “Exit Strategy” is that the vast majority of two bed properties went to first time buyers. A couple to BTL buyers and have been re-let, and the Detached to second or third time buyers for owner occupation.

What he reported to me was that due to low interest rates as a result of the “Mortgage War” customers go for larger properties such as Detached Houses, There is little enthusiasm for new two bed houses. The two-bed new build comes in the form of flats but he felt that with interest being so low the mortgage stretches further to houses being preferable.

In London flats are very necessary, but Ashford is a Provincial Town and there is a choice.

There is little enthusiasm for BTL purchases off plan due to the availability of low interest mortgage deals. A word of warning. Look at the set-up costs of the mortgage. Are the costs front loaded or back loaded? If the former then the Lender is likely to sell on the Mortgage Book!

You may then end up with a Lender you would not have used to start with for whatever reason!

Low interest rates mean rising prices for houses which is good if you are a vendor, but bad news of you are a First Time Buyer.

The decline of the High Street in all provincial towns has had an impact on housing. These empty shops and office blocks go to corporate owners who are able to convert them without planning consent to flats and they are let out and not sold off as leasehold properties. These bypass the BTL owner who, on average, owns just one house.

All the time there is insufficient housing for the population then houses will rise in price. In many parts of the Country there is marked daily increase in prices.

There is also “flipping” whereby a purchaser buys the house, moves in, and immediately puts the house back on the market to make a tidy profit tax free as it has been lived in by the vendor as his home. Some houses have three different owners within four months. The houses are being “traded”, perhaps in disguise. A 10% profit in four months equates to a 30% profit in a year.

Fergus Wilson

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