Buy-to-let investors have been hit by the mortgage squeeze alongside other homeowners, according to new figures from UK lenders.

New buy-to-let loans fell to 144,600 in the first half of 2008, an 18% dip compared with the previous six months, and the first fall for three years.

The Council of Mortgage Lenders (CML) said landlords faced the same issues as homeowners during the credit crunch.

Rents are unlikely to fall as demand for homes to let remains high, it said.

“We expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now,” said CML director general Michael Coogan.

Wholesale

Many buy-to-let investors rely on the wholesale markets, which have dried up during the credit crunch as banks have scaled back on lending to one another.

As a result, the number of new buy-to-let mortgages in the first half of the year fell.

But the decline was not as steep as in the wider mortgage market – which saw a 28% drop in home loans in the first half of 2008 compared with the previous six months.

Buy-to-let mortgages borrowers also had to find a slightly bigger deposit for their homes, in the same fashion as other borrowers.

The average loan was an 83% loan-to-value offer during the first six months of the year.

The CML data shows that Birmingham Midshires maintained its position as the highest gross lender in the UK market.

Some landlords have been unable to raise rents in the short-term as mortgage costs have risen, pushing more into the position where they are having homes repossessed.

Some 0.16% – or 1,800 out of more than one million – buy-to-let homes were repossessed during the first six months of the year, up from 0.11% during the previous six months.

News reported by The BBC

The Financial Services Authority (FSA) has been accused by mortgage lenders of being “unfair” in its recent criticism of their repossession policies.

Last week the regulator warned it would take action against lenders who were too aggressive to customers in arrears.

But the Council of Mortgage Lenders (CML) said the FSA was wrong to suggest the whole industry was at fault.

The FSA replied that potential problems with repossession policies were found with all types of lender.

“There were issues discovered across the piece with all lenders which is why the warning was addressed to the whole market place,” said an FSA spokeswoman.

Unhappy

The unusual public spat between the two bodies hinges around a press release published on 5 August.

“In tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?” CML

In it, the FSA published the findings of a “thematic review” of how lenders deal with customers who are behind with their mortgage repayments and thus are in danger of losing their homes.

The regulator did acknowledge that the aggressive approach of which it disapproved was not typical of mainstream lenders, but was more usually found among specialist lenders.

It found that they were too keen to repossess at the first sign of a customer’s financial problems.

But the CML is very unhappy about the presentation of the FSA’s findings, which it said were confusing to lenders and in danger of misleading the public.

“The key message given to media and the industry was that lenders are failing to treat customers fairly,” the CML responded in its latest fortnightly newsletter.

“But in tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?”

“To publish a report in such ambiguous terms is unfair and confusing for the majority of lenders who are making significant efforts to comply [with industry rules],” it added.

Payment problems

Recent figures have shown that repossessions are on the rise, going up by 41% in the first half of the year, and are expected by lenders to reach 45,000 in total this year.

Although that would be a level of repossession that is far lower than in the housing recession of the early 1990s, there are many more potential problem cases in the pipeline.

The CML estimates that by the end of the year there may be 170,000 people who are more than three months behind with their repayments.

The FSA responded by repeating its earlier conclusions about mainstream mortgage lenders.

It said it had found that some of them could do more to help with their customers’ arrears; levied unfair charges on customers; and didn’t pay enough attention to the way debt recovery agencies or bailiffs acted on their behalf.

News reported by The BBC

The number of loans granted for house purchases in the UK in June fell to fewer than half the number made in the same month a year ago, figures show.

Some 47,000 home loans were granted compared with 98,000 in June 2007, and also down from 52,000 in May this year.

The figures from the Council of Mortgage Lenders (CML) indicate that the mortgage squeeze, caused by the credit crunch, is continuing.

The CML added that the slowdown in mortgage lending was likely to go on.

“The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market,” said CML head of research Bob Pannell.

Deposits

The figures show that the average homebuyer put down a deposit of 22% in June. These new borrowers had an average age of 35.

“Mortgage lending activity remains relatively weak and will decline further” Bob Pannell, CML

Fixed-rate mortgages get cheaper

In May this year, and in June 2007, the average deposit was 20% showing that lenders are tending to favour safer borrowers.

This is the result of banks and building societies limiting the amount they offer in loans owing to funding shortages caused by the credit crunch.

“Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand,” said Mr Pannell.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, agreed that the market would remain flat.

“Loans for house purchases remain subdued with first-time buyers under particular pressure,” he said.

“Any early relief for homebuyers in the form of a cut in interest rates is unlikely following the bigger-than-expected jump in inflation.”

Wide effect

The effect of the squeeze has been felt across the board, with an 8% decline in the number of home loans to first-time buyers and a 9% fall in loans to home movers in June compared with May, the CML said.

First-time buyers are having to find larger deposits for good deals

The average first-time buyer borrowed 3.33 times their income, with the average home mover borrowing 2.94 times their income.

With borrowers looking for certainty during a time of fluctuating mortgage rates, an increasing share of new home loans are fixed-rate mortgages.

Nearly seven in 10 new loans are fixed-rate deals and the CML believes this could increase because of the falling costs of these loans in recent weeks.

But the cost remains relatively high compared with before the credit crunch took effect, and so the number of homeowners remortgaging has fallen. Some 75,000 loans were granted for remortgaging in June, compared with 77,000 the previous month and 96,000 in June 2007.

With people looking for help in searching for a good deal in the uncertain market, there have been more mortgages obtained through an intermediary – such as a mortgage broker – in 2008 compared with previous years.

The proportion of home loans found through intermediaries in the April to June quarter was 78% for first-time buyers, 61% for home movers and 65% for people remortgaging.

These percentages were higher than the same quarter in 2007, but lower than in the first three months of 2008.

News reported by The BBC

Mortgage lenders called on the Government yesterday to adopt new mortgage funding strategies in an attempt to restart the failing market.

In a proposal submitted to the Treasury, the Council of Mortgage Lenders (CML) urged the Government to act to “break the logjam in the housing and mortgage markets and to underpin confidence” by breathing new life into mortgage funding via UK residential mortgage-backed securities and covered bonds.

The CML believes that the Bank of England should offer a repurchase or “repo” facility – whereby these securities are bought back at a later date, with the investor assuming the credit risk. This facility, the council argues, would act as a catalyst to boost investor confidence and therefore market confidence. Only those vehicles first sold to investors in a public issue would be eligible “to ensure the market itself delivered the solution”.

But Michael Coogan, director general of the CML, warned that the plan should be implemented quickly. He said: “The single biggest issue in the housing market that the authorities need to address is the lack of available funding to support new mortgage lending.

“This proposal has the virtue of being delivered through the market itself. Unlike a government guarantee, the investor keeps the credit risk. But it specifically incentivises investors, which the Bank of England’s special liquidity scheme does not. A year into the credit crunch, there is no merit at all in waiting until the autumn before taking steps that will help the housing market to remain more resilient, and so help the overall health and stability of the UK economy.”

Nicholas Leeming, director of propertyfinder.com, added: “The Government is floundering and has singularly failed to offer any leadership to get the markets moving again. The CML’s proposals could get the mortgage market on its feet so that both new lending and existing books of mortgages can be effectively financed.

“With access to new funding, lenders would have to compete with each other again – and that means they could finally bring their sky-high mortgage rates back in line with the base rates.”

News reported by The Independent

Mortgage lenders have drawn up a plan to help kick-start the mortgage market amid falling house prices and a squeeze on the availability of home loans.

The Council of Mortgage Lenders (CML) want to free up UK banks and building societies to offer new home loans.

It wants the Bank of England to guarantee a market in mortgage-backed securities and covered bonds.

This would encourage investment in the market for these products, pushing funds back into mortgage lending.

Confidence

The CML said that the biggest issue in the mortgage market was the lack of available funding to support new mortgage lending.

This has led to the number of mortgage deals on the market being squeezed and the cost of these loans rising.

The lenders’ body wants the Bank to essentially offer a form of secured lending. This would persuade investors to buy mortgage-backed securities – something that has dried up during the credit crunch.

The scheme could be set up quickly and would act as a catalyst to restore market confidence, the CML said.

Unlike the Bank of England’s Special Liquidity Scheme – which allowed banks to swap £50bn of mortgages for government bonds – it would cover new mortgages and investors would still take the credit risk.

“A year into the credit crunch, there is no merit at all in waiting until the autumn before taking steps that will help the housing market to remain more resilient,” said CML director general Michael Coogan.

The plan could receive a cool welcome from those who believe it would involve the state having to underwrite the housing market.

Others might suggest that the drought in mortgage finance would continue without any action.

News reported by BBC