One of my mum’s favourite sayings is ‘there’s not enough room to swing a cat’. Before you panic, Stokesy is not about to have a pop at animals.
Although I am renowned for one of my special requirements when invited to dinner by a lender – please don’t seat me next to a vegetarian – and if it hasn’t walked on the planet, I don’t want to eat it.
No, the analogy, of course, refers to space, and in particular, the lack of it. In a crazy world where a tramp has the whole world to lay their head, we will, of course, cram ourselves into the restriction of four walls.
But to what extent? The infamous ‘Room-To-Let’ product launched a couple of years back has hardly set the world on fire. A sweeping generalisation, but the stark reality is the fact that the English do not like to slum it like our European brothers – to the extent that many first-time buyers want to skip the flat purchase step altogether.
Across the pond where self-build is more prevalent, the average size of a new single-family home in the US has more than doubled since the 1950s, from 1,100 square feet to 2,340. At the same time, families have gotten smaller.
Back to Blighty, and the various indexes and predictions suggest house prices are set to plateau in 2008. London seems to be bucking that trend with house prices raising 1.3 per cent last month. The average price of a home in London hit £354,272 in September, up 16.5 per cent in a year, compared with £183,896, up 8.7 per cent, for England and Wales as a whole.
This surely is great news for the London mortgage brokerages, many who are household names. Why? Well, put simply, they will earn more per mortgage sale.
One high profile lender who has been caught in the centre of the credit crunch told me that they have seen their average loan size drop from £170,000 to £110,000 in a matter of months.
They are not alone, and despite Joe Public wanting to buy big, the lending policies are now prohibiting their actions. Self-certification is subject to much greater scrutiny with extra security checks, the gross income factor applied in affordability models has, in some instances, dropped by 20 per cent, larger deposits are required as loan-to-values (LTVs) have plummeted, and the latest wave of changes to hit loan size maximums have been pared back.
A few years back, lenders paid us flat fees – we argued to the hilt that this was unfair as it did not directly correlate to the value we were providing them. However, if loan sizes do drop next year, this will come back to bite us as we may have to do 1.5 mortgages just to enjoy the same revenue. This will be a real challenge for a market that optimistically is going to be the same size as this year.
The good news is that our market is rife with innovation, and the demand to push the boundaries will remain constant for at least a generation – it’s inbuilt – and shoe-box cities don’t figure in their minds.
Mainstream
First National has been plugging its new overseas offering, which it will distribute through its GEight members.
Buy-to-let
Bank of Ireland is the latest lender to consider carefully ‘back to back’ transactions, restricting them to properties bought at auction and the home improvements are measurable. Distressed sales are not considered.
Norwich & Peterborough BS (N&P) has reduced its maximum LTV to 80 per cent.
Mortgage Express has made changes to allow portfolio customers to aggregate their buy-to-let mortgages and use any surplus equity and/or rental cover to release equity across the portfolio.
Adverse
N&P has reduced its maximum LTV from 90 per cent to 80 per cent LTV.
GMAC-RFC’s LIBOR Menu, the once prominent, but now often forgotten risk-based assessment of detriments through loadings, has been restricted to 85 per cent LTV.
West Bromwich for Intermediaries has relaunched its adverse range. It is a nice and simple format and is available via selected distributors.
The Mortgage Works now restricts the LTV on its medium and heavy ranges to 65 per cent.
First National has introduced a new competitive range and has adjusted its higher lending charge threshold to 85 per cent LTV. GEight members have a further rate enhancement.
