Buy to let investors will struggle to find finance in 2010 despite number of mortgage products rising, experts warn

More new mortgage products are becoming available but leading industry players are warning that 2010 will still be a challenging year especially for buy to let investors.
Almost 1,000 new mortgage products hit the shelves in January, the biggest monthly increase in a year, according to sourcing firm Mortgage Brain’s latest monthly report.
 
Analysis shows live mortgage schemes listed on its sourcing system increased 26% in the past month, from 3,534 on 4 January to 4,457 on 1 February. The figures suggest product availability has now increased for seven consecutive months.
 
Fixed, tracker and variable products all rose in January. Trackers increased by 40% last month. Fixed rate products still hold the high ground, however, with current figures listing 2,664 of all available products following a 24% increase in January. While variable rate products climbed for the second month in a row, up by 1%, with current figures listing 359 products.
 
‘There does seem to be a positive mood in the air at the moment, so we hope we are looking at a glimpse of a healthier and more stable market for 2010,’ said Mark Lofthouse, chief executive of Mortgage Brain.
 
But the latest quarterly bulletin from The Association of Mortgage Intermediaries says that although a recovery seems underway the mortgage market will continue to face significant challenges in 2010. It predicts that gross mortgage lending will be between £150 and £160 billion for 2010
 
Robert Sinclair, director of AMI said that further quarters of GDP contraction may yet happen. ‘Although the recovery is now underway, the mortgage market will continue to face significant challenges in 2010. The shortage of housing supply for sale and the continued low level of mortgage funding will continue to constrain the level of activity in the market,’ he said.
 
‘If we are to see a real improvement in the mortgage market throughout 2010, the Government needs to work harder to get lenders lending again. And the Banks in particular need to ensure that the intermediary sector continues to be supported, in order to provide customers with the full range of options available to them,’ he added.
 
Experts point out that lenders view the buy to let market as too risky for many reasons including a weak return on investment. Ian Stewart, head of securitisation and mortgage funding at Halifax, said more buy to let lenders were needed to re-establish a stable market.
 
While John Malone, executive chairman of PMS, said that due to low LTVs, the market will only cater for professional landlords and customers looking for quick capital returns will be excluded. ‘While one or two recognised players are likely to enter the market in 2010, the buy to let market which existed a few years ago with many lenders offering a variety of products will not be repeated,’ he added.
  
But brokers are slightly more optimistic. According to the Intermediary Outlook Survey from Platform they predict 2010 will be a positive year for the mortgage market. Two thirds, 66%, said that they believe that business will be better this year, in comparison to 2009, buoyed by a general belief in the sector that house prices will rise by up to 5% in 2010.
 
Most, 74%, also believe that interest rates will rise by a maximum of 0.5% to 1% by the end of the year.
 
But some do have concerns. The survey shows that 50% continue to be worried about the availability of funds in 2010, whilst 39% believe that unfair dual pricing will continue to be a major challenge for the sector.