Buy to let news to Friday, May 4th, 2018

Big Ben and Parliament at sunset

GDP figures dampen prospects of a rates rise

The latest UK figures for Gross Domestic Product (GDP) were much worse than anticipated, sparking speculation that the Bank of England’s Monetary Policy Committee is much less likely to raise the base rate next week.

Landlords coming to the end of existing mortgage deals and those on tracker rates, have been bracing themselves for a possible base rate rise after several weeks of rumour, fuelled by the Bank’s aim to reduce inflation to 2% in a growing economy.

However, inflation fell to 2.5% in March and now the GDP figures have revealed that the UK economy grew by only 0.1% in the first quarter of 2018, the lowest level for five years, with construction and manufacturing cited as the main contributors to this.

A low level of GDP typically weakens the Pound, resulting in import costs increasing in real value. This in turn can result in an increase in inflation, giving the Bank of England plenty to consider before next week’s MPC meeting, especially as it has previously suggested high inflation is one of the primary factors for raising the base rate.

Ben Brettell, senior economist at Hargreaves Lansdown, commented:

“The news casts further doubt over a May interest rate rise. As recently as last week markets were pricing in a near 90% chance that the Bank of England would raise rates next month, but this fell to more like 50% after comments from Mark Carney suggested potential ‘softer’ economic data and continued uncertainty over Brexit meant policymakers weren’t wedded to a May hike. Today the market’s saying there’s just a 25% chance that rates will move in May.”

Commercial Trust Limited will bring you full details of the Bank Of England’s next Monetary Policy Committee meeting (on Thursday, May 10th). If, contrary to prior expectation the rate is not increased, this could be good news for buy to let mortgage rates and landlords.

James Brokenshire becomes new Housing Minister

James Brokenshire new Housing MinisterFormer Northern Ireland Secretary James Brokenshire has been appointed as Housing, Communities and Local Government Secretary, following news that the former incumbent, Sajid Javid, is to replace Amber Rudd as Home Secretary.

Elected Conservative MP for Old Bexley and Sidcup in 2010, Brokenshire was previously Northern Ireland Secretary, but resigned in January, 2018, due to an upcoming lung operation.

He was MP for Hornchurch and Rainham from 2005 until the constituency was abolished in 2010 and has campaigned on issues such as crime, asylum and immigration and keeping healthcare facilities at his local hospital.

From 2006 to 2010 Brokenshire was Shadow Minister for Home Affairs and he served as Minister for Immigration and Security at the Home Office from 2014 to 2015 and as Minister for Immigration from May 2015 until July 2016.

In 2016 he was involved, as Immigration Minister, with the introduction of Right To Rent.

In response to his new role, Brokenshire tweeted from @JBrokenshire:

“Honoured to have been asked by the Prime Minister to serve as Secretary of State at the Ministry of Housing Communities & Local Government. Looking forward to taking the Government’s agenda forward especially on building the homes our country needs.”

Government to launch new review of Carbon Monoxide regulations in England

Carbon monoxide rules reviewedLandlords in England could face new requirements regarding carbon monoxide alarms, following news that the Government is launching a review into existing regulations, later this year.

The Smoke and Carbon Monoxide Alarm (England) Regulations 2015, took effect in October 2015. The study will explore whether alarms should cover a more extensive range of heating methods, existing alarm costs and also research on deaths as a result of carbon monoxide poisoning.

This review follows a recent consultation specifically into smoke and carbon monoxide alarms in the private rental sector, although reports suggest that this has resulted in no likely changes.

At the moment, landlords or their agents, must ensure that there is at least one smoke alarm installed on every storey of a rental property, which contains a room used as living accommodation.

Additionally, any room used as living accommodation, which includes a solid fuel burning appliance, must have a carbon monoxide alarm fitted. According to the Residential Landlords Association (RLA), there are 8 million such alarms fitted in English rental homes.

This aspect will be under review, with consideration given to whether the rules should extend to all methods of heating, including gas and oil.

The cost of alarms will also come under scrutiny, to see if this affects installation rates.

Housing Minister Dominic Raab commented:

“Carbon monoxide can be a silent killer and my top priority is to ensure people remain safe and protected in their own homes.”

Commercial Trust will bring you news of any findings and subsequent changes to the law.

Number of buy to let products hits a record 2,000

Buy to let product choice tops 2000Buy to let investors have never had more choice than the present time, as a new report indicates that the number of products on the market, has reached an all-time high of 2,022.

According to Moneyfacts, 464 new products have come to market in the past 12 months, topping 2,000 for the first time, as lenders adapt to changing investor approaches, in the wake of landlord tax changes and the Prudential Regulation Authority (PRA) rules of 2017.

The financial data provider has cited the second phase of PRA rule changes, affecting the way lenders process portfolio landlord mortgage applications, as a contributory factor to a change in investment strategy by many landlords – and the market’s reaction to this has been to increase the number of products available.

Moneyfacts also recently reported a notable increase in the number of limited company fixed rate buy to let products on the market.

“These extra products, which cater for landlords looking to reassess their options after the tax changes, are yet another reason why the overall product numbers have been boosted,” commented Charlotte Nelson, finance expert at Moneyfacts.

“Amid all this upheaval, the market has seen many landlords and aspiring landlords take a step back to assess their options and figure out whether they are making the right choice.

“As a result, BTL providers are now competing for a smaller pool of customers. Offering variety in their range is one way in which they can compete,” she added.

Current system for redress in housing ‘ineffective, confusing and complicated’

Call for change to housing redress systemThe Ombudsman Services (OS) has released details of its Building Balance research into the housing redress system – and has made some damning conclusions in its call for change, that could affect tenants, landlords and agents.

Building Balance was an OS initiative, to open dialogue with tenants, renters, homeowners, landlords and those working in the sector, in regards to the existing housing redress system.

The conversations ran from March 9th to April 5th and elicited over 400 responses, with the vast majority of respondents calling for change in the system.

69% of consumers said that they found the existing system for housing complaints confusing, with over half (55%) not clear on where to go to make a complaint.

Commonly occurring issues included new build properties (56%), maintenance and upkeep (10%) and lettings and estate agency (10%), but other complaints included: unauthorised parking, gas leaks, asbestos, dangerous electrics and even theft.

The full report from OS: ‘Building Balance: Restoring power to consumers in the housing sector’, has been submitted as part of a comprehensive White Paper in response to the Government’s Strengthening consumer redress in housing consultation.

This follows news earlier this year, that OS had announced it would be withdrawing from handling housing complaints from August 2018, indicating at the time that the existing system was “broken”.

The Building Balance initiative aimed to highlight the key challenges that the complaints system presents to consumers.

Commenting on the findings, Chief Ombudsman Lewis Shand Smith said:

“Our Building Balance dialogue has given us a clear remit to call for change. The current system for redress in housing is ineffective, confusing and complicated, and clearly doesn’t provide the service that consumers need.”

Tenant Fees Bill underway in Parliament

Tenant Fees Bill underway in ParliamentThe security deposit paid by a tenant to a landlord or letting agent, is set to be capped at a maximum of six weeks rent, as part of the Tenant Fees Bill, introduced in Parliament on May 2nd.

The limit has been amended to six weeks, after the Housing, Communities and Local Government Select Committee report into the Draft Tenant Fees Bill, had initially suggested a five-week cap, to help make moving home more affordable for tenants.

Under the new Bill, holding deposits will be capped at a maximum of one week’s rent, while landlords and agents will have clear protocol to follow on the return of a tenant’s holding deposit.

In future, landlords and letting agents will be able to charge a maximum of £50 for any changes to a tenancy, unless the landlord can prove that greater costs were incurred.

The news that security deposits would be limited to six weeks, was warmly welcomed by David Cox, chief executive at ARLA Propertymark, who commented:

“ARLA Propertymark has worked hard over the last 18 months to explain the unintended consequences of the ban to government, and we’re pleased they have listened and allowed Change of Sharer, Surrender of Tenancy, holding deposits, exempted the Green Deal Charge, and capped security deposits at six weeks, rather than the [MHCLG Select] committee’s proposed five-week cap.”

Letting fees ban moves closer, with mixed reaction

Letting agent fees ban moves closerA ban on letting fees charged by landlords and letting agents has moved closer with the Parliamentary introduction of the Tenant Fees Bill, on May 2nd.

Announcing details of the Bill, set to be introduced into law in 2019, the Government estimated that the changes would save tenants in the region of £240 million a year, whilst helping to make the true cost of a home move much more transparent.

Anyone breaching the ban will face a fine of £5,000 for a first offence, which will escalate to a criminal offence if they repeat within the next five years. Financial penalties of up to £30,000 can be issued as an alternative to prosecution.

The ban will be enforced by Trading Standards and tenants will be able to apply to the First Tier Tribunal, for the reclaiming of unlawfully charged fees. Landlords will also be unable to recover possession of a property under Section 21, until they have repaid any wrongly charged fees.

Meanwhile, a lead enforcement authority is set to be appointed, to preside over the lettings industry; while amendments to the Consumer Rights Act 2015, will bring property portals in line with the same transparency requirements as the rest of the sector.

The proceeds of financial penalties will be held by local authorities, who will be able to use the money for future local housing enforcement.

The new Housing and Communities Secretary James Brokenshire commented:

“This government is determined to build a housing market fit for the future. Tenants across the country should not be stung by unexpected costs.

“That’s why we’re delivering our promise to ban letting fees, alongside other measures to make renting fairer and more transparent.”

A Government statement said that the Tenant Fees Bill will stop letting agents from ‘exploiting their position as intermediaries’ between landlords and tenants, and ‘prevent unfair practices’ such as double charging for the same services.

But whilst the Government remained bullish on the new Bill, industry feedback was not universally in agreement.

David Cox, chief executive of the Association of Residential Letting Agents (ARLA), was sceptical that the Bill would accomplish what it set out to do – saving tenants money.

He commented: “Our own research last year demonstrated that tenants will end up worse off and banning fees will not result in a more affordable private rented sector.

“ARLA has worked hard over the last 18 months to explain the unintended consequences of the ban to Government, and we’re pleased they have listened and allowed Change of Sharer, Surrender of Tenancy, holding deposits, exempted the Green Deal Charge, and capped security deposits at six weeks, rather than the Committee’s proposed five-week cap.”

The Residential Landlords Association (RLA), suggested that a more pressing matter was for Government to better enforce the current law on letting agents.

It highlighted the changes made in May 2015, requiring letting agents to publish their fees – with fines of up to £5,000 for failure to do so.

However, data from the National Approved Letting Scheme indicated that so far, 93% of councils have failed to issue a single financial penalty, with only three penalty notices served in England for lacking the required transparency on fees.

The RLA also said that 59% of councils had admitted fee transparency was considered a low priority.

David Smith, policy director at the RLA, stated:

“Laws without proper enforcement serve only to let tenants and good landlords down. Rather than pressing ahead with plans for more legislation in the sector that will take time to be considered by Parliament and enacted, Ministers could achieve a greater and earlier impact by using the powers they already have to improve the transparency of fees charged by agents.

“With warnings that the policy could lead to rent rises, there is a very real danger that whilst cutting the upfront cost of renting, tenants will find themselves paying them through higher rents on a permanent basis.”

Commercial Trust short-listed for Best Broker Awards

Commercial Trust short-listed for two awardsSpecialist buy to let broker Commercial Trust Limited, has been short-listed for two awards at the forthcoming L&G Mortgage Club Awards 2018, which take place at an annual lunch at The Guildhall, London, on June 8th.

After voting from the Club’s members and partners, Danny Belton, head of lender relationships at Legal and General Mortgage Club, announced the finalists.

Commercial Trust has been shortlisted in two categories:

Best Broker Firm for Buy To Let

Best Smaller Firm for Overall Quality

Andrew Turner, chief executive at Commercial Trust Limited, commented:

“This is great news as we have been nominated by lenders, so it is a real endorsement of the relationships we have built, as well as testament to the hard work and professionalism of our team at Commercial Trust.

“Our business has been built on core values that place our clients at the forefront of everything we do, which will always be our primary focus.

"I hope that through the spotlight of these awards, we can reach out to even more landlords who need our help, especially at a time when the buy to let industry has become so complex.”

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