Financing your property in the current financial climate and the private rented sector

1. Financing your property in the current financial climate and the private rented sector Paul Rockett NLA Mortgages

2. Agenda • Current crisis..... • The effect of interest rate cuts • Overall Housing Market • The BTL marketplace • General private rented sector • Buy to Let Lenders and products • Looking forward • NLA Mortgages • Questions

3. Credit Crunch How the credit crunch might affect Britain....

4. How the credit crunch will affect Britain....

5. Top Gear – 2009 series

6. Jonathan Ross......

7. Current Position • Now firmly in a period of recession • Interest rates at record lows • Inflation at 40 year low • Unemployment and Company liquidations rising • Financial markets and institutions in a real mess • 175b of quantative easing...... • Increased regulation for Landlord’s and finance • But, generally good news for Landlord’s

8. 6 months of interest rate cuts..... Interest rates cut from 5% to 0.5% in 6 months, but why and how can we expect this to affect the current crises and what about the future...........

9. Interest Rate Cuts • Now at 0.5% - lowest rate on record • LIBOR rate also continues to drop, now at a record low • Main aim is to control inflation and kick start the economy • Confidence is key and it should: • Benefit businesses and manufacturing • Help many mortgage holders, including BTL • Assist with the cash liquidity crises ? • May also reduce the effects and length of the recession

10. Interest Rate Cuts • Excellent news for Landlord’s..... - Mortgage payments more than halved for most - Rents are stable • Demand is generally good • As for the housing market.....will have to wait and see • Consumer confidence is key • Generally a positive move • Media speculation....

11. Interest Rate Cuts – What Next ? • Unlikely to be further cuts, non for the last 3 months • Remember why interest rates have been cut..... • The recession WILL pass and • Rates will increase again, maybe even as quickly as they fell • Fixed rate mortgages now as cheap as they have ever been • Might be a time to fix (3 or 5 years) at a higher rate than you are paying!!!!!!

12. Overall Housing Market • So much conflicting information, but the green shoots of recovery are there.... • Media speculation and hype..... • Have house prices stopped falling? • RICS show growing interest from first time buyers and Landlords • Halifax price to earnings index at 4.36 in May 09 (4.26 in April) & forecast to drop further (5.84 in July 07) • Still a lack of mortgage funds for first time buyers

13. Private Rented Sector • Expected growth of 500,000 properties over the next 10 years • Little increase in social housing provision • Demand for social housing expected to increase by 25% (1m) by end of 2010 • New housing at lowest levels for 60 years • Normally around 175,000 units per annum • Only 100,000 completed in 2008 • 70,000 or less in 2009 and 2010

14. Private Rented Sector • Sub-prime residential mortgages have either disappeared or expensive • 1.4b of personal debt in the U K, 175m each day in interest charges • Residential re-possessions up 54% on this time last year – 125 properties per day on average • Mortgage arrears continue to increase (1.57%) • 1 in 5 of home owners face zero or negative equity and cannot re-mortgage

15. Private Rented Sector • Personal insolvency at record levels • More people living on their own • Increased immigration – 240,000 in 2007 • Student population • Mobile workforce • More socially acceptable to rent than a decade ago • Continued fear over house prices • Unemployment increasing

16. BTL Mortgages • 11m mortgages or which 1.1m are BTL • NOT sub prime mortgages • City centre apartment problems have inflated BTL arrears • Professional Landlord’s are a good risk to Lender’s • BTL is profitable business • Lower LTVs and larger fees..... • A minimum of 25% deposit required • But is a specialist market and has been for years

17. Credit Crunch – BTL Lenders – Top 10 • Mortgage Express • BM Solutions • Paragon Group (Includes Mortgage Trust) • Bristol & West • Cheltenham & Gloucester (C&G) • Capital Home Loans (CHL) • The Mortgage Business • The Mortgage Works • Barclays – Woolwich • Northern Rock

18. Credit Crunch – BTL Lenders – Top 10 • Mortgage Express • BM Solutions • Paragon Group (Includes Mortgage Trust) • Bristol & West • Cheltenham & Gloucester (C&G) • Capital Home Loans (CHL) • The Mortgage Business • The Mortgage Works • Barclays – Woolwich • Northern Rock

19. Green shoots of recovery – housing market + Consumer and Lender confidence is key + Media speculation also plays a part... + First time buyer interest at a 10 year high + Shortage of family housing stock + Prices show signs of stabilising + Some good mortgage deals around (25%+ deposit) • Lack of funding for first time buyers • 10% deposit required in many cases - Fear of further house price reductions

20. NLA Mortgages • Bespoke mortgage service to NLA members • Whole of market offering • A free service with no ‘broker’ fees • Self select from a web based sourcing system • Cash back incentive on all products available for NLA members only • Website – www.nlamortgages.co.uk • Helpline – 02920 695 555

21. Looking Forward – Buy to Let • So difficult to predict the market • BTL is good business for Lender’s but a specialist area • Lender confidence in the sector is key but fragile • Traditional Lender’s will return and new Lender’s will emerge • More products and special deals will surface • Difficult to obtain lending for adverse clients and above 75-80% LTV • Interest rates will rise as we come out of recession • Still a good time to be a Landlord

22. NLA Mortgages Questions Please Paul Rockett Managing Director, NLA Mortgages E-mail – paul@tbmc.co.uk