RICS publishes fire safety guide

RICS fire safety guide, policymakers pushing up rents, peak in first time landlord mortgages, 2017/18 tax returns not accepted October-January;
Houses of Parliament

Since the Grenfell Tower disaster, fire safety in residential property has naturally become a huge focus for all. As a result, the Royal Institution of Chartered Surveyors (RICS) has brought out a 20-page guide to basic fire safety.

For use by landlords, homeowners and tenants alike, the guide covers common causes of fires, protection and prevention and fire escape planning.

For landlords there is clear commentary describing responsibilities to tenants, and similarly where responsibility transfers to the tenant.

Landlords failing to meet their legal obligations are at risk of a remedial action notice from their local authority of up to £5,000.

For landlords, the key areas of responsibility are:

  • Smoke alarms
  • Carbon monoxide alarms
  • Gas checks
  • Electrical compliance
  • Furniture compliance

Follow the link to read “A clear impartial guide to Fire Safety” from RICS.

Pound coins and bank notes

More evidence that policymakers are pushing up rents

Buy to let lender, Paragon, has released its Q3 2019 analysis of the marketplace, with further strong signals that changes from policymakers are driving up rents by reducing landlord’s appetites to invest.

8% of landlords surveyed had an intention to buy more rental property in Q4 2019.The more encouraging news is that the number of landlords looking to sell also reduced in Q3.

However, at 29% of landlords reporting a boom or growth in tenant demand, the highest proportion since the same quarter last year, there is only one logical outcome says John Heron, director of mortgages at Paragon:

“In broad terms, landlords have been buying fewer properties and selling more at a time when there has been a resurgence in tenant demand.

“RICS reported a similar trend in their August residential survey and it is widely anticipated that this will lead to reduced choice and higher rents for tenants.

“This is probably not the outcome that policy makers were looking for.”

The Paragon report also highlighted a shift away from highly geared portfolios. In 2014 the average proportion of property funded by debt sat at 40%. This has reduced to 33% in Q3 2019.

The implication is that landlords are more financially cautious currently. Whilst this may be a strategic financial move on behalf of investors, the tightening in affordability rules in January 2017, brought in the Prudential Regulation Authority, could well be a factor.

There was a marginal growth in average portfolio size quarter on quarter. Landlords with larger portfolios have made the greatest contribution to an increase from 13.1 properties in Q2 to 13.2 properties.

You can read the full report from Paragon here.

Couple adding up finances

5-year peak in products for first time landlords

The number of buy to let mortgage products, available to first time landlords, has grown from 660 in October 2014 to 1,474 in the same month this year, according to Moneyfacts.

Buy to let mortgage rates on offer to this group have also declined, from an average of 3.83% to 2.87% for a two-year fixed rate and from 4.45% to 3.38% for a five year fixed rate.

It is important to differentiate between first time buyers and first time landlords, when considering this data, and not confuse the two.

A first time landlord commonly refers to a homeowner looking to make their first investment in a rental property. It is this cohort that lenders are targeting, with this broadening of their product ranges.

It is possible to invest in buy to let without owning any other property, but the choice of products tends to be narrower. Those considering this route should be aware that a minimum deposit of 20% is required.

First time landlords are also subject to a minimum deposit of 20%.

Anyone considering an investment in buy to let should seek financial and tax advice so they are clear on profit calculations after costs.

The tax implications for buy to let are nearing the end of a period of change, which is why this area of research is particularly key.

Securing a mortgage from a wide choice of options, not just from one or a handful of lenders, will help in getting the best deal possible in terms of monthly repayment, based on an investors specific circumstances.

HM Revenue and Customs

2017/18 tax returns not accepted as evidence of income by lenders

Many buy to let mortgage lenders require tax returns to be no older than 18th months, in order to be accepted as proof of income.

This means that each year, over the period October to January, those who have not prepared their tax return for the current year, may face problems.

If you intend to rely on your tax return as proof of income, for a buy to let purchase or remortgage within this period, you will need to complete your 2018/2019 tax return.

Some people put off completing tax returns until the January deadline, as do some accountants.

The simple solution, to avoid delaying any mortgage applications you may be planning in the next three months, is to complete your tax return now.

Who is most likely to be affected by this?

Self-employed investors and portfolio landlords are most likely to be affected by this situation, as tax returns are most commonly used as proof of income for these parties.

To complete your tax return online, you can sign in on the Government website here.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.