september 9, 2008 make it happen buy-to-let alasdair mcdonald and david wilson, rbs intermediary...
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September 9, 2008
Make it happen
Buy-to-let
Alasdair McDonald and David Wilson, RBS Intermediary Partners
The RBS Intermediary Roadshow
The RBS Intermediary Roadshow
2
Buy-to-let - a silver lining?
The RBS Intermediary Roadshow
3
Agenda
• Market overview
• Opportunities for buy-to-let
• Advising on buy-to-let - how you can help
• Why NatWest?
The RBS Intermediary Roadshow
4
Market overview
• Pressure on disposable income, weakened housing market
• Movements in the Base rate - how does this affect the market?
• Impacts on interest rates / products:
– credit crunch
– funding
– less FTB products, lower LTV restrictions
• First-time buyers - less demand due to:
– reduced confidence, less affordability, tighter lending criteria
• Home movers - uncertain market, negative equity threat
• Where does this leave the buy-to-let market?
The RBS Intermediary Roadshow
5
Market overview continued
• House prices have fallen in the first half of this year
• Most commentators expect a 20-25% peak to trough fall in house prices
• Since the peak in October 06, house prices have fallen 9%
Quarterly changes in House Price Inflation
-6
-4
-2
0
2
4
6
8
Q1 0
4
Q2 0
4
Q3 0
4
Q4 0
4
Q1 0
5
Q2 0
5
Q3 0
5
Q4 0
5
Q1 0
6
Q2 0
6
Q3 0
6
Q4 0
6
Q1 0
7
Q2 0
7
Q3 0
7
Q4 0
7
Q1 0
8
Q2 0
8
Source: Halifax house price index
The RBS Intermediary Roadshow
6
Market overview continued
• The buy-to-let market has continued to grow
• There are now over 1.1 million buy-to-let mortgages outstanding in the market
Buy-to-let mortgages volume (£m)
020,00040,00060,00080,000
100,000120,000140,000
Q32006
Q4 Q12007
Q2 Q3 Q4 Q12008
Q2
Source: CML
The RBS Intermediary Roadshow
7
Market overview continued
• The buy-to-let market has continued to grow as a proportion of the total mortgage market, and now accounts for 13% of all mortgage completions
Source: CML
Mortgage market, by value (%)
0%
10%
20%
30%
40%
50%
2005 2006 2007 Q108
Remortgage
Mover
FTB
Buy to let
Other
The RBS Intermediary Roadshow
8
Is buy-to-let affected?
Michael Coogan, CML Director General:
“The shortage of mortgage funding is creating similar problems for buy-to-let landlords as it is for other borrowers. However 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”CML press release - 26 August 2008
• The CML expects to see a continued “healthy appetite” for buy-to-let finance in 2008 in line with continued demand for rental property.
The RBS Intermediary Roadshow
9
Opportunities in the buy-to-let market?
• June 2008 figures from ARLA:
– 85% of landlords have no intention of selling in the next 12 months
– 72% expect to keep their properties for over 10 years
– 40% of landlords expect to invest further in buy-to-let market
– 60% prefer to arrange mortgages for their buy-to-let properties through a mortgage broker or financial adviser. A further 20% said it depended upon the property in question
• First-time buyers: nervousness / affordability issues mean more will turn to the rental market
• Buying property to let is no longer a short-term gain, but it remains a long-term investment
The RBS Intermediary Roadshow
10
Opportunities in the buy-to-let market?
• Migration impact:
– over 500,000 people are coming to Britain from abroad each year - typically they rent
• Regional variations - one size does not fit all
• More and more multiple applicant buyers (deposits/affordability)
• Regeneration opportunities - East London / 2012 Olympics
• University towns
• Let-to-buy
The RBS Intermediary Roadshow
11
Broker opportunities for buy-to-let
• Understand the buy-to-let market (finding property, landlord responsibilities)
• Advising on:
– Mortgages – know the market, find the best deal for the customer
– Bridging finance: – understand short-term funding, open / closed loans
– negotiate fees with lender
– Insurance– Look at cross-selling opportunities (e.g. buildings and contents, legal expenses, emergency
assistance, Rent guarantee and Tenant’s insurance)
– look at commission opportunities
• All of these offer new opportunities to generate income
The RBS Intermediary Roadshow
12
Broker opportunities for buy-to-let
• Stay in touch - regular 6/12 month reviews– possibilities for fee-based advice
• Generate links with associated professionals - solicitors, estate agents, letting agents
The RBS Intermediary Roadshow
13
Buy-to-let knowledge - finding a property
• Build relationships with estate agents / rental associations to understand local opportunities
• Current national and local issues include:
– Northern market prefers ‘renovate to rent’ - suburban houses
– Southern market prefers centrally located new-build flats
– Southern buyers looking North for ‘value’ purchases
– Find key local hotspots for growth (industrial regeneration areas)
• Is the property right for potential tenants (e.g. near to a school for families, transport links, central for flats)
The RBS Intermediary Roadshow
14
Buy-to-let knowledge - being a landlord
• Need to know/understand:– Running costs - ground rent, service charges, repairs, letting/management fees
– Landlord and tenant law
– Tenancy agreements
– Safety regulations and responsibilities
– Costs of using a letting agent (could be 10 -15% of the rent)
– Costs/benefits of furnished v unfurnished properties
– HIPs and EPCs are a legal requirement for landlords
• Advising on all of these can offer income opportunities
The RBS Intermediary Roadshow
15
Where to go for more help
• A number of associations have plenty of information available:– Council of Mortgage Lenders (www.cml.org.uk)
– Association of Residential Letting Agents (www.arla.co.uk)
– Royal Institution of Chartered Surveyors (www.rics.org/)
– National Association of Estate Agents (www.naea.co.uk)
The RBS Intermediary Roadshow
16
Summary
• Buy-to-let market is sustainable
• Significant long-term income opportunities
• Lots of help is available
• NatWest buy-to-let proposition offers a full range of solutions
The RBS Intermediary Roadshow
17
NatWest - how we can help
• NatWest is the specialist buy-to-let lender for RBS Intermediary Partners
• Our buy-to-let proposition:
– up to 4 applicants on a mortgage
– a wide range of property types can be accepted
– up to 10 loans accepted (across the RBS Group)
– Fixed £ product/arrangement fees (not a % of the loan)
– Flexible rental cover calculations: 110% at BoE rate + 1.75% for loans 1-5, up to 75% LTV); 125% at BoE rate + 1.75% for loans 5-10 and/or over 75% LTV
– up to 85% max LTV (65% for new build flats)
– fees-free re-mortgage package available
The RBS Intermediary Roadshow
18
Contact us
Thank you
For more information:
call: 08459 00 11 10
www.rbsip.com
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