Leeds Real Estate

[Mindy]

It would be an understatement to say that we find ourselves in very strange times at the moment and we appreciate how hard it is sometimes to remain objective.

The Credit Crunch - what does it mean to you?

“Let’s be honest, unless you are lucky enough to have been in Bali for the last six months or so you can not have helped but notice that it’s getting tougher out there. However, before we all think about valuing our portfolios and selling up I think its time for a reality check.

The basis of this problem lies in the level of risk that lenders now wish to take on new deals, this in effect restricts the loan against the value of the property and in turn pushes the rate higher as they look to maximise returns.

This makes it harder for first time buyers and also those wishing to re-mortgage if the current loan is fairly high against the value of the property. It even impacts on those with equity in there property as the rates on offer are now not as attractive as they were 6 months ago.

The lenders have been criticised for increasing their margins, the recent cuts in the Bank of England rates have not always been passed on in full and the once attractive tracker deals now run at around 1 to 1.25% above the Bank of England rate when 12 months ago they would have at least mirrored it.

We have lenders pulling out of the Market on a daily basis and news of job cuts in the Financial Services industry every day, swap rates that are up and down almost daily and Mervin King and his team at the Bank of England supporting the Market with a £50 Billion loan. If we mix it all together then the journalists would have you believe we have a recipe for meltdown.

But, its not all doom and gloom- look at the opportunities that this may bring. A bit of short term pain and realignment in the markets may not be a bad thing and if it brings a return to more prudent lending then I, for one, am in favour.

Let’s go back to the opportunities - if you are in the lucky enough position to have some equity in your portfolio then its time you considered a review of your borrowings. Lenders still want to lend money to quality investors- this is how they make their money! Furthermore, what a time to buy, with rental demand at its strongest level for many years there could be some great opportunities for you as investors. The shift in the markets has meant that we now need a slightly higher deposit but the returns are still good and as a medium to long term investment, property is still hard to beat.

As a firm we have seen a significant increase in the Buy to Let work we are looking at this year and this is echoed by a survey carried out by one of the major lenders, The Mortgage Works, part of the Nationwide Building Society group. They report that 44% of brokers feel that experienced landlords will continue to buy property and only 12% feel that experienced landlords would be seeking to sell. This is further reinforced by our own numbers which show an 11 % rise in Buy to Let activity on Quarter 1 last year.