Getting a deal done in the US

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Well there is no doubt it is a good time to buy in the US, from a currency exchange point of view!

The Australian dollar just hit “parity” again with the US dollar, meaning buying power for the Australian not afraid to venture outside Australian shores, is virtually unprecedented.

Here is a brief summary of the basics related to currently available US mortgages, from OSmortgages.com.

Loan Size.

Minimum US$100,000.  US lenders and most intermediaries have become restrictive about the loan size requirement and the amount of work that is required for a small loan (reading between the lines: “too hard”). In addition property vacancy and valuation issues tend to be more prevalent in lower-priced properties hence US lenders, particularly lending to foreigners, do not want large exposure to this market. This does not mean that there is no US lender out there at all that will do loans for foreigners for less than 100k, just not lenders that OSmortgages currently deal with. This situation may change in future and I will keep you posted.

Loan Ratios – LVR or LTV.

Generally non-residents need “30% down” as they say in the USA. Loan ratios exceeding 70% will be sufficiently rare, so keep this in mind. Now this changes if you have a large loan requirement – above US$1million. For these loans generally 60% LVR is the maximum usually available. All large loans should be treated as case by case however and an individual enquiry about your case should be made.

Interest rates.

Interest rates available to non-residents start around 4.7% and are all fixed. Variable only kicks in after a short (3 or 5 year) initial fixed term expires. Otherwise you can arrange up to 15 years fixed rate for investment properties and up to 30 and 40 year fixed rates for a home (owner-occupy). An indicative 15 year fixed rate right now is 4.875%.

Refinancing and Cashout.

A common enough question. Refinances and those in order to extract equity are available up to 60% LVR, or 50% lvr if loan value is > US$1million…. and depending on your lennder, on a case by case basis.

Servicing requirements.

You will find the basics about what it takes to satisfy a US lender you can afford the loan are not too dissimilar to Australian lending requirements. However there are a few differences. One such is the request to know specifically the value of council rates and strata fees you incur on existing properties in Australia or elsewhere. In the US, lenders specifically deduct these amounts from income when calculating debt-to-income ratios. They also like to see “reference letters” from banks where you have been a customer in the past.

Process….

Let us know your specific situation by getting in touch. If your general scenario meets the above requirements, the first step will be filling in a preliminary questionnaire, so we can gauge your US borrowing ability. This website will be updated with more tools and calculators to make this stuff easier to work out, quickly, so stay posted.

Daniel, OSmortgages.com

Buy-to-Let – Investing in UK property, is back

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In an article by Richard Dyson from UK website thisismoney.co.uk he emphaises that more people have realised buying for investment purposes is slowly coming back in popularity.

It states, “While house prices appear to be falling in almost every area apart from London, rents are rising fast everywhere.

Landlords, and the banks and building societies that are increasingly prepared to lend to them, are capitalising on this.

Volatile stock markets and some of the lowest deposit rates on record mean more money is being pumped into property.”

And, ” The sector has enjoyed a dramatic rebound – buy-to-let lending has grown 72 per cent since the first quarter of 2009 when the mortgage market hit rock bottom.

By contrast, lending to first-time buyers has grown by just 12 per cent over the same period. Younger couples who might previously have been planning to get a mortgage are now tenants, and the growth of this group is driving up rents.

Nigel Terrington, chief executive of specialist landlord lender Paragon, says: ‘Britain is subject to a long-term structural change in the housing market, with fewer owner-occupier households and more people renting.’ ”

Rental returns are now more attractive for landlords with good deposits ready to invest. Gross rental yields, now vary between five and 15 per cent, according to lettings agents.

Many landlords buying property today have established portfolios and believe conditions are more appealing now than for many years.

OSMortgages.com

Australian dollar returns to parity with US

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The Australian dollar is higher after reaching parity with the greenback overnight for the first time since September 22.

It hit an overnight high of 100.15 US cents as Wall Street stocks gained almost three per cent after Germany and France pledged to come up with a plan to shore up Europe’s banks against a Greek default.

At 0700 AEDT, the Australian dollar was trading at 99.87 US cents, 1.5 US cents up from 98.33 cents on Monday.

German Chancellor Angela Merkel and French President Nicolas Sarkozy, met on Sunday to resolve the sovereign debt crisis.

After meeting in Berlin, President Sarkozy promised a “lasting, global and quick responses before the end of the month” to the eurozone government debt crisis that is threatening to engulf banks and core euro countries.

GFT Forex director of currency research Kathy Lien said the the commitment by Eurozone’s two biggest national economies to stabilising banks had given the market a sense of optimism.

“Little details were provided from Merkel and Sarkozy but as the two main stumbling blocks to any major bailout package for the Eurozone, their co-operation has been warmly received by the markets,” she said from New York.

“If Merkel and Sarkozy manage to come up with a decently structured bailout program that would mitigate contagion throughout the region.”

Locally, the National Australia Bank (NAB) will release its monthly business survey for September on Tuesday.

On Thursday, the Australian Bureau of Statistics will issue official jobs figures for September, which are expected to show 10,000 jobs were added to the economy in September, the median of an AAP survey of 15 economists shows.

The unemployment rate is expected to stay steady at 5.3 per cent.

AAP and Businessspectator.com.au

Tips – Property valuations when buying in France

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As a result of recent transactions we can now advise that valuations in prime metropolitan areas of France, are not having any noticeable valuation variances or difficulties.

In the less-populated areas and more remote regions, there is the potential for short valuations.

We can confirm that French valuations – as ordered by the lender, can be challenged. Similar to the process in Australia, if the client or the agent, or the vendor can provide evidence of 2 or 3 recent sales results confirming a higher value than the initial valuation result, then the valuation can be reviewed upon request, providing this evidence.

There has been cases where a valuer will revise the valuation upwards, facilitating a purchase at or near the valuer’s revised estimate of market value or original purchase price.

All clients purchasing in remote regions should be aware, and will be made aware by OSmortgages, that valuations can sometimes surprise the purchaser and this potential outcome should be considered, when planning a purchase.

Tips – UK valuations

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Here are some key factors to take into account when considering whether a UK lender for Buy-To-Let (investment) property in the UK will accept the client’s chosen property as suitable security

• Flats, where the building is above 5 stories high have to have a working lift.
• Residential dwellings above a business premises have to have a separate entrance to the business and also have to have their own title deeds.
• Properties building in last 10 years have to have a structural defects warranty
• Max LVR for property built in last 2 years is 75%
• There is no lending on multiple occupancy investment properties.

Let us know if you have a client looking in detail at a UK property for investment purposes.

Post Office Withdraws from Buy-to-Let market

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The Post Office has withdrawn its entire range of buy-to-let mortgages.

The lender says it has pulled out of the buy-to-let market for the short to medium term in order to focus its efforts on helping first-time buyers, movers and remortgage customers.

It previously lent up to 80% LTV for buy-to-let mortgages and offered a range of two, three and five-year fixed rate deals.

Meanwhile, the Post Office is reducing its residential mortgage rates by up to 1.24%, bringing its five-year fix at 90% LTV below 5%.

This product how has a rate of 4.99% – down from 6.15% – and comes with a £995 fee, which the Post Office says is market leading.

The lender has also reduced the rate on its three-year fix at 90% LTV from 5.99% to 4.75%, which comes with a £995 fee.

Mike Cook, head of mortgages at the Post Office, says: “Many of the five-year fixes that are heavily advertised are only for borrowers with a large deposit, which excludes many first-time buyers or those moving up the property ladder.

“If you only have a 10% deposit, our 4.99% five-year fixed rate offers excellent value, and protects borrowers from any potential bank base rate rises.”

Source: Mortgage Strategy 21 September 2011.

London property bubble ‘about to burst’

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The London property bubble could be about to burst, with the number of “distressed” sellers in the capital rising for the first time, according to one property company.PPR Estates said it had seen rising number of inquiries from property owners in London looking for a quick sale below the current market price. It said rising unemployment, an increase in the number of company liquidations and a collapse in buyer interest – particularly in areas hit by the recent riots – were to blame.

Nick Hopkinson, the director of PPR Estates, said that over the past few years there had been a rising number of “distressed” sellers in other parts of the country, but London had appeared to be immune as prices continued to rise.

This has changed though within the past two months, with the company now reporting a jump in the number of inquiries from both residential and commercial property owners in the capital who need to access the equity in their home quickly.

“Two very different property markets have emerged in London and across the rest of the UK in the last year,” Mr Hopkinson said. “London has been the one area of the UK to buck the downward house price trend. Prime London prices, limited supply and cash-rich international buyers have masked the real state of the housing market by propping up the national statistics.

“And our company has had relatively few distressed inquiries from London sellers as a result of the unique dynamics in the capital.”

But he said this sentiment had changed over the past few months, a trend particularly noticeable in areas hit by the recent riots – such as Lewisham, Croydon, Walthamstow and Tottenham.

“In the areas we have seen buyers withdrawing. We are also aware of international buyers pulling back from investment purchases as a result of a loss of confidence in the ‘safe haven’ investing benefits of London. As we move into autumn I fear this may prove to be the catalyst that bursts the unsustainable property bubble that built up over the last few years.”

According to the latest data from the Land Registry, in July house prices in London showed increased by 1.3pc over the year. In every other region in England and Wales house prices fell. The biggest falls were in the North East, where prices fell by 8.8pc; in Yorkshire and Humber they declined by 4.5pc while in Wales they fell by 3.4pc.

In the South East and South West price falls were not as dramatic, but property prices fell by 1.1pc and 1.9pc respectively over this period.

PPR Estates said that in the regions negative equity was a growing problem for many home owners. A year ago it was able to help more than 15pc of the “distressed” sellers outside London who contacted the company. Now it was able to help less than 10pc because they market price of their property was less than the value of their mortgage.

source: UK Telegraph, 7 September, 2011

Available mortgage products in UK up by 40% in 6 months

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The number of mortgage products available to intermediaries in the UK has increased by 40% during the past six months, according to figures released today from Mortgage Brain‟s Monthly Product Analysis.

Over 3,900 new mortgage products have been introduced into the UK intermediary mortgage market since March 2011, indicating a 40% uplift in product availability.

A 2% increase in product numbers during August has taken the total number of live mortgage products listed on Mortgage Brain‟s market leading sourcing system to a new high of 13,842 (as of 30th August 2011).

Mixed movement was seen during the past month for the industry‟s three main product types, however, with Variable rate products dropping (1.5%) for the first time in three months to now represent 1,724 of all available products.

Despite the slight decline during August, the longer term analysis remains positive with Variable rate products witnessing an 82% increase in product availability compared to this time 12 months ago.

Following a 3% increase (258 new products) during August, Fixed rate products remain the most popular product type accounting for 60% of all available products with 8,273 products being listed on Mortgage Brain‟s sourcing system.

A 1% increase last month saw Trackers climb for the fifth month in a row and now stand at 3,845 – up from 3,808 as of 1st August 2011.

Mark Lofthouse, CEO of Mortgage Brain, comments, “Mortgage product numbers have increased for the ninth month in a row now, which is great news for brokers and the longer term analysis illustrates that the UK intermediary mortgage market continues to show real and significant improvements in terms of product choice and availability.”

“Twelve months ago, for example, saw 7,618 products being listed on our system. Since then 6,224 new products have been introduced to bring the current total to 13,842. That‟s an 82% increase since August 2010, which speaks volumes for the direction in which the market has been heading.”

source: Mortgage Brain UK Press Release 6 September, 2011. Mortgage Brain is an IT platform provider for mortgage intermediaries providing mortgage compliance and mortgage comparison and lodgement services.

Surprise fall in UK House Prices for August

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The average price of a house fell 0.6pc in August to £165,914 – 0.4pc lower than a year ago. House prices have declined in two of the past six months, Nationwide said, with the last drop in April. Prices increased 0.3pc in July.

A shortage of homes for sale and the Bank Rate at a record low have helped to support prices and Robert Gardner, Nationwide’s chief economist, said the August decline should not change the picture of “relative stability that has characterised the market over the past 12 months”.

“Sluggish demand for homes, combined with only a gradual rise in the supply of available properties, has helped to keep property prices stable since last summer,” he added. “We expect this trend to be maintained over the remainder of 2011, although downside risks have increased as UK and global growth prospects have weakened.”

On the less volatile three-month measure, Nationwide said house prices increased 0.1pc, though this was lower than the 0.3pc increase in the previous three months.

Mr Gardner argued that the major risk for the housing market is weak economic growth causing a further deterioration in the labour market.

Bank of England mortgage data this week showed lenders approved more mortgages in July than in any of the past 14 months. Approvals rose slightly to 49,239 but are far lower than the long-run average of 90,000 per month.

Reuters/Excerpt from UK Telegraph article, 1 September 2011.