Buy-to-let - a silver lining?

Steve Carruthers / Graham FelsteadCorporate Account Manager / Head of

Corporate Accounts

08459 00 11 10

www.rbsip.com

Agenda

•Market overview•Opportunities for buy-to-let•Advising on buy-to-let - how you can help•Why NatWest?

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?

Market overview

•House price growth (CML data)House price growth (Q4, year on year % change)

0

2

4

6

8

10

12

14

16

2004 2005 2006 2007 2008

Is Buy-to-let affected?Michael Coogan, CML Director General:

“Tenant demand for private rented property remains strong, and buy-to-let is fulfilling an important role in helping to deliver an increased flow of high quality homes to rent.

Buy-to-let has remained resilient in the face of the funding constraints that have affected the sector and the wider mortgage market.”Daily Telegraph - Feb 08

The CML expects to see a continued “healthy appetite” for buy-to-let finance in 2008 in line with continued demand for rental property.

Is Buy-to-let affected?•Number of buy-to-let mortgages:

2006: 846,000;

2007: 1,083,000 (up 23%!)

Gross advances £billion (CML data)

0

20

40

60

80

100

120

140

160

2005 2006 2007 2008

House purchase FTB

House purchase Homemovers

Remortgages homeowners

buy-to-let

Is Buy-to-let affected?•Buy-to-let sector represents 12% of gross mortgages, up 50% from 8% (June 2005 to June 2007)

Gross advances by type and % (CML data)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2005 2006 2007 2008

House purchase FTB

House purchase Homemovers

Remortgages homeowners

buy-to-let

Opportunities in the buy-to-let market?

•2007 Figures from CML and ARLA:•90% of landlords have no intention of selling for some time•just 2% of landlords intend to sell when their tenants’ lease expires•40% of landlords expect to invest further in buy-to-let market •Only 0.12% of all buy-to-let mortgages in force were repossessions in Q4 2007, compared to 0.16% in the residential mortgages sector

•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

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)

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

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

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)

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

•Advising on all of these can offer income opportunities

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)

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

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)

•up to 10% overpayments accepted during the loan period

•Fixed £ product/arrangement fees (not a % of the loan)

•One simple rental cover tier: 125% at BoE rate + 1.75%

•up to 85% max LTV (65% for new build flats)

•fees-free re-mortgage package available

Thank you

For more information:

call: 08459 00 11 10

www.rbsip.com