BOE holds rates at 0.5% - Property Prices Rising or Falling? – 125% is back!?

House prices continue to decline according to the Halifax House Price Index, who reported a figure of 0.5% in June from May 2009. Whilst in contrast to Nationwide’s Index which reported an increase of 0.9% for the same period, the figures are however expected to be slightly erratic due to the low volume of overall lending compared to historic figures.

The CML forecast on Monday that the expected repossessions for 2009 would total only 65,000, down from the originally forecast 75,000, showing perhaps that government measures to provide households in financial trouble may be working? The FSA reported that the number of mortgages in arrears reduced by 12 per cent to just under 60,000.

It was not unexpected that the Bank of England’s Monetary Policy Committee voted to maintain a rate of 0.5% on commercial bank reserves or to continue with its programme of assets purchases that will total £125 billion financed by the issuance of central bank reserves.

Whilst the FSA has stated it will address the introduction of maximum loan to value or maximum borrowing based on income on all mortgages in a discussion paper, the government must at the same time compel banks to increase or at least maintain the availability of loans to businesses and households. The FSA’s paper may go further to suggest a ban on all self certified mortgages, requiring income proof for all home loans. As such a substantial segment of the market it is hard to see how this type of measure will ease the current borrowing crisis.

Propping up the property market as always is the availability of bridging loans. Many Lenders and Private Financers are returning to funding the market due to the high returns bridging finance can offer, which many say underpin the recovery of the property market providing the niche finance that is otherwise not available in the market place.

Whilst discussions of capped borrowing levels and tougher criteria are taking place, Nationwide have rather quietly introduced a product that allows existing borrowers to take a loan of 125% Loan to Value. The debate of irresponsible lending versus keeping the market afloat is set to continue for a long time to come.

Property Finance & Mortgage Lending News

It seems to be a waiting game in property at the moment – is it the right time to buy?

There’s no doubt that once confidence returns to the potential buyer that their purchase won’t be worth less than they paid for it in the coming months, people will start buying again and the knock on effect will see property prices start to increase and off we’ll in property mania once more. But where will this confidence stem from?

News and figures released still look relatively bleak right now, with the Citizens Advice Bureau (CAB) reporting a 49% rise in secured loan and mortgage arrears enquiries and the CML confirming a 2% gross lending decline in May. Positive headlines such as CHL Mortgages announcing a 15% reduction in their total arrears and Infoserve reporting a 94% increase in internet searches for Mortgage Advisers are still overshadowed by the continuing Banking crisis and global economic downturn.

HM Revenue and Customs figures showed 60,000 completions took place in May, down from 64,000 in April.

It seems highly unlikely that a sudden increase in property sales and prices is on the horizon given the lack of funding within the banking system to supply high demand and recent increases in fixed rate mortgages in the UK only adds to the reasons why many are choosing not to go out and buy…… Bridging Finance Companies have seen their number of completions increase significantly over the previous months with funding lines being reintroduced.

Niche Mortgage Lending and Bridging Finance in a troubled financial climate?

We all agree that mortgage lending is not what it used to be and it’s highly likely that the speculative lending that has come back to bite the tax payer the hardest, is highly unlikely to ever return as we knew it…..

So, what does that meant for prospective purchases?

Figures released show that mortgage lending in May 2009 was £10.3 billion, 58% lower (source CML) than the same time last year. There are now a reported 1,265 UK mortgage deals available compared to 11,951 in July of 2007 (source www.moneyfacts.co.uk); a staggering decrease.

There are faint rumours that the property market is on the up, first time buyers are purchasing again and mortgage approvals are increasing month on month (16% in April – source CML), the availability of finance however is still very restricted, if not just in quantity, then by decreased loan to value (LTV) and unfortunately mortgage fixed and tracker rates still continue to be disproportionate to the low bank base rate (BBR) we are currently supposed to be enjoying?

As a Mortgage Broker I have seen an increase in contact from clients, ones I haven’t heard from for a while, now calling to enquire about a property they’ve seen at a ‘good price’ and would like to know what sort of rates and finance are a currently vailable.

Professional Landlords and Investors have continued to purchase throughout the downturn, sourcing below market value (BMV) properties by using structured finance to secure a self supporting asset. A short term decrease in value in a long term self supporting investment that has required no deposit input, to them, is a no brainer, but what finance is out there?

True BMV Bridging Finance has returned. It allows a property purchase to take place with little or no deposit input required. The criteria has tightened compared to the niche Bridging Loans that have gone before, it’s a product aimed at Investors that have the net worth to put a deposit down, but would rather put their funds to better use or make them go further. It’s not a product for people who can’t afford a deposit!

The terms are:

1.5% per month
1.5% arrangement fee
NO exit charges

Legal and valuation fees apply as standard.

The Bridging Loan is written for a term of six months (1 month minimum), allowing the Investor to abide by the minimum ownership criteria imposed by almost all Mortgage Lenders and therefore remortgage at the six month point based on the value of the property at that time.

The product is available for residential, buy to let and commercial property and allows up to 100% of the purchase price to be borrowed providing this does not exceed 70% loan to Open Market Value (OMV).

There are opportunities to refinance the Bridging Finance prior to the six month point with UK and Foreign Lenders making tranche funds available (when they have them…) and for high yielding Investment and Commercial ventures, purchases based on OMV rather than the lower purchase price remain available too.

So, in summary, niche lending is out there, you just have to know where to look…..

Contact us for more information

Ben Randall – aka BTL-GURU

www.benrandall.co.uk

Bridging Finance Loans UK

Regardless of today’s financial climate niche Bridging finance is still available to help you complete on your purchase on time. There’s no doubt taking advantage of the low property prices will pay dividends in the long term, all you need is the right finance.

Rates start from 0.95% per month.
Up to 85% loan to value
Funds in 24 hours!
Non status & Bad Credit Bridging Loans available.

Bridging Loan Finance for:

Repossessions
Below Market Value BMV property purchases
Commercial Bridging Loans
Large Loan Bridging Finance
Chain Breaking
Foreign Property Purchases
Capital Raising

Contact us to find out more:

www.benrandall.co.uk

What is a Bridging Loan?

A Bridging Loan is short term funding to provide temporary financing until more permanent finance can be found. Bridging Loans are available for a whole range of financial requirements and can be on the basis of a 1st, 2nd or even 3rd charge equity release, usually provided for any legal purpose.

Examples:

• Commercial & Residential Purchase
• Auction Purchases
• Capital Raising *
• Chain Breaking
• Refurbishment
• Speculative Deals
• Business Cash Injection
• Defective Property

* Capital raising funds can be used for many reasons including holidays, overseas property investment and tax bills etc.

Security

• Residential Property
• Commercial Property
• Land (with or without planning permission in place)
• Real Property (such as Plant machinery)

Bridging Loans carry a higher interest rate than standard mortgage lending and at the offer of loan stage there will be an agreed term of repayment, normally between one day and two years.
Bridging Loans are most commonly used when the financing requirement is urgent and beyond the timescales that a standard mortgage lender or bank could provide. In some cases Bridging Lenders can provide funds within 24 hours. Another common use of bridging finance would be to fund the purchase a new home prior to the existing property being sold.

Characteristics

Bridge loans will almost certainly carry higher fees which can include:

• Administration Fees
• Arrangement Fees
• Legal Fees
• Completion Fees
• Valuation Fees
• Exit Fees **
• Broker Fees (normally non-disclosed)

** A fee charged to redeem the loan, typically equivalent to one month’s interest payment.

As most bridging Loans are not regulated by the Financial Services Authority the above fees can vary substantially as they fall within no boundaries or guidelines, only competitive pricing.

Application

Bridging Lenders will consider loans to discharged bankrupts and clients with adverse credit such as CCJs and IVAs. They will lend to individuals as well as Businesses, Ltd Companies and tax efficient vehicles such as SPVs.

Variations

Bridging Loans are split into two main categories:

Closed Bridging Finance

At the time the funds are drawn down there is a firm exit in place to repay the loan normally within a short period of time. The most common use of Closed Bridging Finance would be the pending sale of an existing property on which contracts have been signed and exchanged/missives concluded.

Open Bridging Finance

At the time the funds are drawn down there is no fixed exit or repayment method for the lenders comfort, only an agreed maximum term that the loan can run for. Seen as higher risk than closed Bridging Finance it is therefore more expensive.

Other forms of short term finance:

Mezzanine Finance

Often a combination of debt and equity stake which is typically used to finance the expansion of existing companies. To secure mezzanine finance the business would normally have to demonstrate a track record in the industry with an established reputation and product, a history of profitability and a viable expansion plan for the business (e.g. expansions, acquisitions, IPO).

Bridging Finance Lenders

There are over 20 Primary Bridging Lenders in the UK that are able to lend their own funds and therefore set their own criteria of risk.

Private Finance

Should Bridging Lenders decline to lend, Private Finance debt and equity financers can be sort to provide funding for the examples above. This type of finance is normally very expensive.

Specific Uses

A Bridging Loan can be used as a Below Market Value (BMV) purchase instrument where the initial purchase takes place at the lower purchase price allowing a subsequent refinance application to be placed with a mainstream lender for borrowing based on the Open Market Value of the property with the purpose of releasing the difference in equity between the purchase price of the property and the higher resulting remortgage loan. This technique is popular with Professional Landlords.

Costs

Bridging Loans typically cost between 1-2% per month. Variable rates with margins over Libor can sometimes be applied as an alternative or an addition.

Find an Independent Bridging Finance Broker to give you all the available options.

For Niche Bridging Loan Finance, Professional Landlord Services and Interest Rate Hedging Solutions please visit www.benrandall.co.uk

Interest Rate Risk Management & Bespoke Bridging Finance Loans

Interest Rate Risk Management (caps, collars, swaps) and Bridging Finance Loans from www.benrandall.co.uk

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