Buy-to-let news to Friday, March 2nd, 2018
Further warning that rates rise may be imminent
The Bank of England Governor Mark Carney, has given further strong hints that a base rate rise is imminent, which may increase mortgage repayments for many landlords.
Carney recently provided a written report to the Treasury Select Committee, in which he indicated that interest rates are likely to rise at a faster rate than had previously been anticipated.
“Were the economy to evolve broadly in line with the February inflation report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report.”
Carney’s words were given further weight by the Bank of England’s chief economist Andy Haldane, who stated that the UK’s economic growth is accelerating faster than policy makers had forecast, while wage growth is likely to exceed 3% this year (outperforming inflation forecasts), having been measured at 2.5% in the last quarter of 2017.
CPI inflation fell from 3.1% in November to 3.0% in December, with inflation expected to remain around 3% in the short term, reflecting recent higher oil prices
The Bank’s Monetary Policy Summary in February, commented:
“On balance, CPI inflation is projected to fall back gradually over the forecast but remain above the 2% target in the second and third years of the MPC’s central projection.
“In light of these considerations, all members thought that the current policy stance remained appropriate to balance the demands of the MPC’s remit. Any future increases in Bank Rate are expected to be at a gradual pace and to a limited extent. The Committee will monitor closely the incoming evidence on the evolving economic outlook, and stands ready to respond to developments as they unfold to ensure a sustainable return of inflation to the 2% target.”
Report highlights a solid January for rental yields and growth
Rental yields for landlords held their own across the UK in January, bucking the downward trend in 2017, with Northern regions delivering the best returns.
The latest report from Your Move showed that at 5.0%, rental yields in the North East were the highest in the UK in January, even though rents are typically lower than in other regions.
Close behind came the North West, with an average rental yield of 4.9%, with Wales hot on the heels at 4.8%.
Meanwhile, the data showed that the fastest increase in rents year-on-year, were recorded in the North West and East Midlands, with the typical monthly rent in these regions 2.9% higher than 12 months earlier.
These figures comfortably exceeded the average for ten regions in England and Wales during the same 12 months, which returned 2.5% growth, equating to an average monthly rent of £853.
Your Move’s information reveals that eight of the ten regions experienced rental growth across the 12 months to January, with only London – and the North East, seeing a decline.
Martyn Alderton, National Lettings Director at Your Move, commented:
“The new year has started in a positive fashion for the rental market in England and Wales, with prices rising on average by 2.5% to £829.
“Only London and the North East saw prices fall, with every other area seeing rises year-on-year.”
“While 2017 saw the yields achieved by landlords continue to be squeezed, landlords can begin to feel confident in the market as yield levels have stabilised in all areas.
“With more tenants seeing renting as a long term option, landlords, with their letting agent’s support, should identify features to encourage longer tenancies.
"For example, our recent tenant survey has found that more than a quarter of tenants would pay on average £24 more a month to live with their pets. Tenants are also prepared to pay more for communal living extras, such as a shared garden, childcare facilities or a gym.”
Shorter term buy to let mortgage costs on the rise, but more choice
Further weight has been added to the suggestion that now may be an opportune time to review existing buy to let mortgages, with costs for shorter-term products on the increase.
New information from mortgage data specialist Mortgage Brain, indicates a number of cost increases in the past quarter, as a result of interest rate rises and the changes to underwriting, which were introduced by new PRA rules.
According to Mortgage Brain, the cost of a two-year buy-to-let tracker at 60 or 70 per cent loan to value, has increased by 3%, since November 2017.
At 80% LTV, a two-year fixed rate at 3.44%, has seen a 2% rise in costs over the same period, while two year fixes at 60% and 70% LTV, have risen 1%.
However, whilst shorter-term products have seen an increase in costs, the reverse is true of longer-term fixed rate buy to let products.
For example, a five-year fixed rate at 70 per cent LTV, has reduced by 2% since November, while the product at 60% and 80% LTV has fallen 1 per cent.
Commenting on the findings, Andrew Turner, chief executive at Commercial Trust Limited, said:
“The impact of PRA changes and rates speculation are starting to have an effect on some buy to let mortgage costs.
“Landlords should remember that rates have been at historically low levels for some time now, so it is no surprise to see changes in the market gradually taking effect.
“What is encouraging with Mortgage Brain’s data, is that some longer-term products have actually reduced in cost.
“At a time of great current uncertainty over what will happen with rates in the future, now might be the perfect opportunity to review your existing property portfolio and look at your remortgaging options.”
Mortgage Brain also reported that 2017 was a good year for buy to let mortgage choice, with 721 new products introduced into the UK buy-to-let market, a 32% increase.
On January 15th, 2018, there were 2,959 buy to let products, whilst in January 2017, there were just 2,238.
Mortgage Brain chief executive Mark Lofthouse commented:
“It looks like the Prudential Regulation Authority changes, coupled with what could be seen as the start of a number of interest rate rises, is starting to affect the cost of mainstream buy-to-let mortgages.
“Buy-to-let product numbers are at a new high, however, and there are still pockets of cost reductions and savings to be had for potential landlords and property investors.
“With the buy-to-let market set to become even more complex in 2018, though, we might be on the start of a new path in terms of mortgage cost movement compared to the past few years.”
Landlords given opportunity for their say on PRS
A major new survey on the private rental sector, proclaimed as the biggest in a decade, is being launched, giving landlords and letting agents the opportunity to have their say on the issues that matter to them, with the results being fed back to Government.
The Ministry of Housing, Communities and Local Government, in conjunction with NatCen, is looking to randomly contact over 100,000 landlords and agents who are registered for the three Government tenancy deposit schemes, for their views on the PRS.
Among the topics up for discussion are: lettings and tenancy policy and practice, landlord finances and taxation, future investment plans, willingness to rent to different types of tenants, the benefits system, energy efficiency and safety and awareness of and compliance with Government requirements.
“We are inviting landlords and letting agents from across England to take part in the survey.
"The more landlords and agents who take part, the more accurate the results will be,” NatCen commented.
“The English Private Landlord Survey will be the most authoritative evidence source on the profile and views of private landlords and their agents in England.
"The results will help inform future government policy about the private rented sector,” it continued.
The results of the survey, which will run over six weeks, during March and April, will be presented to Government Ministers and officials.
Welsh ban on tenant fees moves closer
A ban on tenant fees in Wales has moved a significant step closer following the results of a Welsh Government consultation on the matter.
More than 680 people responded to the consultation, which ran from July to late September 2017, with over half supporting proposals to ban fees charged to tenants in the private rental sector.
Among the key findings were that 62% of tenants felt that fees had affected their ability to move; while 86% said that fees influenced their decision on whether or not to use an agent. 61% of landlords indicated that they were unaware of how much their agent had charged their tenant.
A summary of the responses can be accessed online here
Welsh Housing Minister, Rebecca Evans AM, is keen to act swiftly on the responses:
“These findings clearly support our proposals to ban fees charged to tenants, and further add to the evidence base that such fees make the Private Rented Sector unaffordable and inaccessible for a substantial number of tenants.
“I will shortly bring forward legislation to ban all payments required of tenants in the Private Rented sector, with limited exceptions stated on the face of the Bill. Anyone requiring a banned payment as part of the tenancy will be committing an offence. It will be important that the ban on fees to tenants is enforced. Consequently, any person charging a prohibited payment will be subject to enforcement action.”
However, not everyone is in agreement that a ban on tenant fees will have the desired long-term impact of keeping tenant costs down.
Following the announcement, the Residential Landlords Association commented:
“The RLA believes banning fees paid to agents by tenants will not make renting cheaper.
“Research from the RLA found that more than half of letting agents questioned, 57% plan to cope with the proposed tenant fee ban by increasing the fees landlords pay.
“This raises the prospect of the extra costs being passed on to tenants in higher rents over the long term.”
Government dismisses idea of a national landlord register
The Government has confirmed it does not aim to launch a mandatory register of private landlords, describing the concept as “an unnecessary and costly additional layer of bureaucracy”.
Minister for the PRS, Heather Wheeler MP, stated:
“The Government does not support a mandatory register of private landlords.
“The majority of landlords provide decent and well managed accommodation and requiring those landlords to sign up to a national register would introduce an unnecessary and costly additional layer of bureaucracy.
“Mandatory licensing is already in place for higher risk rental properties, larger houses in multiple occupation (HMOs).
“We consulted extensively on changes to the scope of mandatory licensing.
“There was broad support for extending this to include all HMOs with five or more occupiers.
“We published our response to our HMO reforms consultation in December 2017, and laid The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 in February.
“Where there are problems with smaller HMOs in a particular area, local housing authorities have the discretionary power to introduce additional HMO licensing.
“Local housing authorities are also able to introduce selective licensing of landlords in targeted areas to tackle specific problems, as long as the statutory requirements are met. We have committed to a review of selective licensing and will announce further details on the review after Easter recess.”
MPs debated Labour MP Phil Wilson’s proposal for a register, aimed at rooting out the minority of landlords who fail to take proper care of their properties.
Commenting on Ms Wheeler’s announcement, the Residential Landlords Association (RLA) said:
“As an alternative to selective licensing, the RLA supports a system of self-regulation for landlords, whereby compliant landlords join a co-regulation scheme which deals with standards and complaints in the first instance, while those outside the scheme remain under the scope of local authority enforcement.”
Thousands of landlords could be affected by new HMO licensing laws
A Government extension of its mandatory HMO licensing, in October, is set to impact on thousands of landlord properties.
From October 1st, 2018, mandatory licensing will apply to purpose built flats where there are up to two flats in the block, into the scope of mandatory licensing. The rule change will also remove the three storey rule - at present mandatory licensing applies to HMOs of at least three storeys and five occupants comprising of two or more family units.
According to RLA PEARL, 16% of landlords rent to people in HMOs and it is believed that the extension of these rules will mean a further 177,000 HMOs will become subject to mandatory licensing in England.
Properties will require a mandatory licence if the following criteria applies:
- It is occupied by five or more persons;
- is occupied by persons living in two or more separate households; and
- the standard test under section 254(2) of the Act;
- the self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats; or
- the converted building test under section 254(4) of the Act.
It is understood that the Government plans include a six month grace period to give landlords time to comply and local authorities time to process licences.
Commenting on the news, the Residential Landlords Association (RLA) was critical, stating:
“The RLA believes many of the changes are unnecessary and says they will put a huge strain on local authorities. The Association made its points in its formal response to the Government consultation.”
Below are the top 3 buy to let mortgage deals, by lowest initial rate, for fixed, tracker and variable products.
This table updates twice daily with the latest deals from a diverse range of specialist and high street lenders. Call our team to discuss any deal or click through for the full range.
|Rate||Product||Monthly cost||LTV||Lender fee||APR|
|1.39% then 5.00% Fixed for 26 months||Fixed for 26 months||£115||60%||£2,178||4.70%||Enquire|
|1.50% then 5.19% Variable for 24 months||Variable for 24 months||£125||75%||£295||4.78%||Enquire|
|1.49% then 5.00% Tracker for 24 months||Tracker for 24 months||£124||60%||£2,178||4.76%||Enquire|
|1.73% then 4.99% Fixed for 26 months||Fixed for 26 months||£144||70%||£2,239||4.75%||Enquire|
|1.50% then 5.19% Variable for 24 months||Variable for 24 months||£125||75%||£295||4.78%||Enquire|
|1.89% then 5.00% Tracker for 24 months||Tracker for 24 months||£157||70%||£2,178||4.82%||Enquire|
|2.94% then 4.99% Fixed for 24 months||Fixed for 24 months||£245||80%||£1,825||4.94%||Enquire|
|2.89% then 5.19% Variable for 24 months||Variable for 24 months||£240||80%||£295||4.98%||Enquire|
|3.90% then 5.50% Tracker for 24 months||Tracker for 24 months||£325||80%||£500||5.43%||Enquire|
|4.59% then 6.58% Fixed for 24 months||Fixed for 24 months||£382||85%||£3,110||6.73%||Enquire|
|4.64% then 6.58% Variable for 24 months||Variable for 24 months||£386||85%||£3,110||6.74%||Enquire|
Important: Lender fee is calculated based on a loan amount of £100,000.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.
*Some lenders offer mortgages with no fees; however, our broker fee of up to £1,198 for Buy to Let first mortgages and up to £2,198 for Buy to Let secured loans will apply.
This table includes both Purchase and Remortgage rates. Speak to our advisors for a personalised recommendation.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.