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Peer to peer lending set to change the UK mortgage industry, it is claimed
Peer to peer finance is set to revolutionise the UK mortgage industry, starting with secured lending to landlords, according to a new independent review of the buy to let mortgage industry. Population growth combined with a weak home building response mean the phenomenon of buy to let would survive a new recession similar to, or even worse than, that experienced in 2008, according to the research conducted by The Wriglesworth Consultancy and commissioned by peer to peer lender Landbay. However despite this, the research also reveals the higher price of buy to let finance, with average new mortgage rates one third more expensive for landlords than for owner occupiers. This leaves a gap for P2P mortgage lenders to disrupt the industry. In the first ever published stress tests for a peer to peer lender, the report also reveals that secured peer to peer lending against buy to let properties has a natural stability against economic shocks. This contrasts with severe uncertainty over other types of riskier peer to peer finance, such as unsecured personal loans to consumers, business credit, or other forms of direct peer to peer property ownership and development finance. Stress tests of Landbay’s loan book also indicate the importance of quality manual underwriting when lending to landlords. More attention to landlords’ personal finances makes loan books less prone to losses than historic examples of mass buy to let lending using automated underwriting systems to approve loans. ‘The mortgage world has changed. Now everyone has access to the sorts of markets that were once the preserve of large financial institutions,’ said John Goodall, chief executive officer of Landbay. ‘A new energy for more inclusive finance, combined with new technology, is revolutionising the world of saving and borrowing. This has only just begun, and over the long term the impact of these fundamental changes will be far greater than was at first envisioned,’ he explained. ‘All peer to peer finance is relatively new, but it would be an enormous mistake to assume that means this broad swathe of lending is in any way uniform. Combining P2P lending with the backstop of income producing property as security can create an entirely different class of investment while shaking up competition in the world of mortgage lending,’ he added. Continue reading
City apartments set to remain popular buys in Australia in 2015
Investor appetite for city apartments in Sydney and Melbourne will remain strong in 2015, as low interest rates attract first home buyers and investors, according to a new analysis. The outlook for interest rates is mixed but headline indicators such as unemployment, construction activity and GDP point to a period of weaker overall economic growth which will result in interest rates remaining steady in the short to medium term, says the latest property outlook report from Colliers International. ‘This is good news for the residential sector and points to continuing demand side momentum. The low interest rate environment is a key driver of residential activity in the current market, and we anticipate it will provide supportive conditions for strong investment activity in 2015,’ it explains. It predicts that Sydney, Melbourne and Brisbane residential markets will have the strongest residential growth, as weaker economic conditions in Western Australia will lead to a slowdown in development and investment activity in 2015. It also points out that developments in central locations with close proximity to public transport, work and retail amenities will be in higher demand. Consequently, this demand will see the number of apartment developments grow in Melbourne, Sydney and Brisbane throughout 2015. The Melbourne and Sydney CBDs have been the strongest performing markets, with the volume of apartments under construction in the next five years to reach and 18,000 and 6,000 respectively, buoyed by strong offshore demand, and a rapidly rising inner city population, a trend we anticipate will continue in 2015. Next year is set to see Australian property experience a continued increase in investment volumes, improved tenant demand and structural change across various sectors. The analysis also suggests there are two key themes for the year ahead that will see technology continue to change the property industry and investors continue to diversify from core assets to other markets and sectors. According to John Kenny, chief executive of Colliers International Australia and New Zealand, 2014 was the year that investment in property continued to accelerate, New South Wales returned as a growth economy and the market saw signs that leasing demand was on the return. ‘Ownership of Australian property continued to become concentrated amongst fewer owners. Strong flows of capital continued to enter the Australian property market both from offshore and overseas,’ he said. He pointed out that by the middle of November transaction volumes were well up on 2013 levels and although total volumes are still some way off the 2007 peak, some sectors such as the national industrial market and the Melbourne CBD office market have now exceeded volumes in that year. ‘The majority of sales are now to Australian investors. This is not surprising given that Australian investors are now recognised as the most confident in the world, according to our most recent Global Investor Sentiment Survey,’ he added. Offshore investors also continued to enter the market with new groups emerging, particularly from… Continue reading
Intermediaries remain the most popular choice for buy to let investors
UK landlords sourcing buy to let finance from intermediaries has increased as they regard it as the best way to secure a good deal, new research suggests. There has been a 6% increase in landlords who prefer get property finance from intermediaries and large scale landlords more likely to make exclusive use of intermediaries, according to the latest report from specialist buy to let firm Paragon Mortgages. The Private Rented Sector Trends survey, which has been tracking landlord confidence and views on the buy to let market for 20 years, also shows that 60% of landlords agree intermediaries are valuable in finding the best buy to let deals. More than a third, 36%, of landlords in the fourth quarter of the year preferred to source buy to let finance exclusively via intermediaries, a 6% increase over the past three months, up from 30% of landlords in the third quarter. In comparison, 23% of landlords in the last quarter of 2014 preferred to source buy to let finance directly from lenders, and 23% sourced through a mix of intermediaries and lenders, which reduced from 28% in the third quarter. Large scale landlords, those with five or more properties, were more likely to prefer to source all their buy to let finance via intermediaries at 40% compared with 23% of small scale landlords. Small scale landlords on the other hand were almost twice as likely to source buy to let finance directly through a lender at 35% compared with 19% of large scale landlords. Some 60% of landlords agreed that intermediaries provide a valuable service in finding the best buy to let deals, in comparison with only 6% who disagreed. Additionally, 42% of landlords surveyed said that sourcing directly though a lender is only suitable for the simpler buy to let propositions. ‘Although the market has seen strong growth this year, many landlords remain cautious, particularly in view of interest rate expectations, the weaker conditions that we have seen in the housing market and the disruption we are likely to see around the general election in 2015,’ said John Heron, managing director of Paragon Mortgages. ‘When combined with the positive benefits that professional mortgage advice can bring, it is no surprise to see landlords turning more to the intermediary sector in less certain times,’ he pointed out. ‘Landlords, especially those newer to the market, recognise the benefits of using a trusted, experienced and knowledgeable broker to help source their finance. Brokers have always been key to the buy to let mortgage market and will continue to be, going by this research, for as far ahead as we can see,’ he added. Continue reading
