Buy to Let
Mortgage market to contract further
Remortgaging represented 49% of mortgage business in January and February of 2008 and is expected to grow further over the next quarter, according to the Intermediary Mortgage Lenders Association (IMLA).
Remortgage business represented 49% of all mortgage cases at the beginning of this year, increasing from 48% at the time of the previous survey from IMLA. Intermediaries expect to do 2% more remortgages over the next two months and 72% of lenders expect remortgage volumes will be higher or much higher over the next quarter.
Alternatively, home moving business has decreased, according to IMLA, falling from 23% to 20% over two months. Although first-time buyer business increased by 1% to 11%, brokers expect both categories to decline over the next two months – by 3% for first-time buyers and 2% for home movers.
Buy-to-let business has held steady at 18% since the last IMLA survey, according to intermediaries, but a decline of 1% is expected this year. Lenders expect buy-to-let to remain stable, but a minority indicated it would decrease slightly. Overall the market is expected to contract further in 2008, with lenders predicting volumes will be 11% lower in 2008 than in 2007, while intermediaries see a reduction of 6% year on year.
Prime borrowers represented a growing proportion of the total business volumes – comprising 74% of cases introduced by intermediaries to lenders, up from 73% two months ago. Self certification cases were down slightly, but sub prime was unchanged, according to IMLA. Over the next two months, brokers expect the number of prime homeloans to grow slightly, and other types decline marginally. Lenders have forecasted a similar pattern, with mainstream expected to grow slightly and all types of sub-prime (particularly heavy and medium-adverse) and self certification to decline.
Peter Williams, IMLA’s executive director, says: “With home-buying activity currently depressed and many fixed-rate and discounted deals up for renewal, there has been an increase in remortgaging business. In some cases, however, borrowers will struggle to remortgage and may end up paying significantly more once they switch to the lender’s standard variable rate.
“Lenders and brokers need to work together closely, not just to support new borrowers looking for a suitable mortgage, but also to help mitigate the repercussions of payment shock for existing borrowers who reach the end of their current deal.”
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