Buy-to-let news to Friday, February 9th, 2018

Bank sign carved in stone

Bank of England holds base rate at 0.5%

The Bank of England’s Monetary Policy Committee (MPC) has voted unanimously to keep its base rate at the current level of 0.5%.

This is the second consecutive meeting to maintain the current rate, after the MPC increased it by 0.25% in November 2017.

That decision resulted in some buy to let mortgage lenders increasing some of their mortgage interest rates, adding costs to monthly repayments for landlords on tracker and variable rate mortgages. So today’s decision represents good news for rental property owners.

For more details, and our feedback on this news, read our more detailed article here.

Figures show serious buy to let landlords sticking to their guns

Serious landlords stick to their gunsNewly released statistics indicate that serious portfolio landlords remain committed to the private rental sector for the long haul.

Data from Upad for the final quarter of 2017, showed a 20 per cent year-on-year increase in landlord registrations.

Within that figure, the number of landlords with a portfolio of five or more properties who registered, grew by 56% year-on-year for Q4.

Upad reports that this growth is a positive indication that buy to let landlords refuse to be beaten down by legislative changes which have resulted in tougher financial and tax conditions over the past couple of years.

This stance is further reinforced by figures for the opening 4 weeks of 2018, for which Upad reports a 14% year-on-year increase in registrations.

James Davis, founder of Upad, commented:

“Legislative changes introduced by the government in the last couple of years will, no doubt, place doubt in the minds of some accidental and less committed landlords. It would be foolish, however, to think that those who have made the strategic decision to invest in property would be so easily put off.”

Private Rental Sector still growing

PRS still growingDemand within the private rental sector continues to grow despite a slowing down of buy to let mortgage lending. That is the conclusion drawn by the Nationwide, who analysed recent data from the latest English Housing Survey.

Whilst landlords have been hit by punitive legislation over the past two years, which has impacted on lending criteria, underwriting and taxation, there remains a buoyant market for investors willing to let property.

The data, supplied by the Ministry of Housing, Communities & Local Government, indicates that there are now a record 4.7 million homes within the private rental sector in England, which is 20% of all households. In 2007, rental property contributed 13% of all homes.

“Within the 35 to 44 age group, the number of households renting has increased by 126% over the past 10 years to 1.1 million. There has also been a significant increase in the number of privately rented households in the 45 to 54 age group,” said Nationwide chief economist, Robert Gardner.

“It is interesting to note that the private rental market has continued to show steady growth despite a significant slowing in buy to let mortgage lending, suggesting a shift amongst landlords towards cash purchases. Changes to the tax system, limiting deductibility of mortgage interest, may be one of the factors behind this” he added.

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

“The latest data from the English Housing Survey underlines the growing importance of the private rental sector in England over the past decade. In London in particular, rental homes constituted 30% of households in 2017.

“Affordability has become an issue for many people and it is also interesting to see the growth in tenants from the 45 to 54 years old demographic.

“Clearly the prevalent housing crisis will not be resolved by one silver bullet and buy to let has an essential role to play in providing housing on an ongoing basis – let’s not forget, many people do not want to own their own home, preferring the flexibility of renting.

“That is good news for investors looking at bricks and mortar for an income and the potential of capital growth, whilst also helping to alleviate the pressures in the market.

“Buy to let has become tougher for landlords in recent years, which is reflected in the slowing down in applications, with lending criteria tightening up.

“The changing landscape simply puts an extra focus on the value of specialist broker firms, who can use their expertise to find solutions that facilitate good returns for landlords now and into the future.”

Could England follow Scotland’s lead on Letting Agent Code?

Could England follow Scottish Agent CodeAs the Scottish private rental sector adjusts to the new Letting Agent Code of Conduct, there are suggestions that a similar initiative, aimed at improving standards for landlords and tenants, could be introduced south of the border.

New legislation took effect in Scotland at the end of January, forcing letting agents to meet minimum standards in order to sign-up for a compulsory Register of Letting Agents. They have until October 1st, 2018, to comply and join the register, or could face six months’ imprisonment and/or fines of up to £50,000.

This enormous shake-up is to fulfill part of the Scottish Government’s objective of improving the private rental sector, which it is hoped will mitigate landlords and tenants from being exposed to agent malpractice.

To qualify for the register, which is maintained by Scottish ministers, letting agents operating in Scotland, will have to meet a new Letting Agent Code of Practice which includes providing minimum training requirements for employees.

Agents will have to demonstrate that they have written policies on a number of topics, including fees, terms of business, complaints, rent collection and end of tenancies. Further documented protocol will include identity checks, referencing, tenancy agreements and property management.

Compliant agents will also need to have professional indemnity insurance, Client Money Protection and a separate client funds account.

Neil Cobbold, chief operating officer at PropTech business PayProp, says that the Scottish model could be replicated in England, in a similar move to the plan to ban letting agent fees – something that Scotland initiated in 2012.

“The majority of agents will already have these processes and policies in place, but the new system requires them to have everything fully in order and in writing,” he commented.

“A Code of Practice ensures every agent is adhering to the same standards and the sheer depth of requirements should discourage any rogue or criminal agents from starting a new business.

"No matter how experienced, if agents brush up on what is expected of them, this can contribute towards improving the overall customer service experience of tenants and landlords.

"If this new system is successful in Scotland, there's no reason why similar rules can't be introduced in other parts of the UK," said Cobbold.

"It's unlikely these changes will trickle down for a while yet, but it'll still be beneficial for agents in England to monitor their progress."

Cobbold backed-up his suggestion that England could follow suit, by referring to comments that Sajid Javid made at the Conservative Party Conference in October. 2017, when he intimated that in the future agents may need to comply with minimum training requirements and an industry code of conduct.

"It's clear the English government is also looking to regulate letting agents more closely, and it's surprising that there's been no further mention of these specific proposals since they were put forward several months ago," he stated.

Ombudsman Services to withdraw from ‘broken’ housing solution

Ombudsman to withdraw from handling housing complaintsOmbudsman Services (OS) is to withdraw from its complaints handling role in the property sector and has called for a new housing ombudsman system to be created, to replace what is describes as a ‘broken’ system.

The organisation currently provides services covering estate agents, letting agents, managing agents and surveyors, but is set to withdraw these by August 6th, 2018.

During the interim period, OS will collaborate with charities, consumer groups, property professionals and the public to create a major report on the way forward, thought to be the creation of a single housing ombudsman. Further information on this process is likely to be reported in March.

This will be submitted to the Ministry of Housing Communities and Local Government (MHCLG) in the spring.

The move comes as OS has described the present redress system as “a really confusing picture for all involved” and the organisation wants to see a single, dedicated body responsible for handling housing industry complaints.

Lewis Shand Smith, chief Ombudsman, stated:

“We are ceasing what we’re currently doing in the housing sector in a professional and planned way, because we believe it is not adding value. Rather than continue to offer a broken solution to a broken market, we are stepping away to listen to what consumers actually want.

“There are models in other sectors that work far better, for instance the single ombudsman model in financial services and the scheme we operate in energy which handles around 40,000 complaints every year,” he added.

OS believes that existing models in the Finance and Energy industries could provide a blueprint for a new system, a view shared by Secretary of State Sajid Javid, last autumn.

“Housing is one of the biggest issues we face as a nation and a fair, balanced, redress system will make sure that it serves the whole of society. We want to work to develop a model that works for everyone,” Shand Smith concluded.

Government issues a further warning for Welsh landlords

Welsh Government warns landlordsThe Welsh Government has issued a further reminder to landlords in the Principality that they must submit a licence application to Rent Smart Wales, or face prosecution.

The warning follows a number of landlord prosecutions over the past few weeks, as the Government cracks down on unlicensed landlords in a bid to improve standards in the private rental sector.

The compulsory registration process came into force on the 23 November 2015 (The Housing (Wales) Act 2014) and landlords failing to comply, face a number of possible penalties, including:

  • Fixed Penalty Notices (of either £150/£250)
  • Rent Repayment Orders
  • Rent Stopping Orders
  • Criminal Prosecutions and Fines

Furthermore, landlords will not be able to serve valid section 21 notices for possession of their property.

"Self-managing landlords in Wales must realise that registering with Rent Smart Wales is not enough to comply with the law. They are also required to pass training and submit a licence application,” Lynda Thorne, the cabinet member for Housing and Communities at Cardiff Council, the licensing authority for Rent Smart Wales, declared.

"Anyone who carries out letting or property management duties needs a licence. Enforcement powers have been active for some time now and we are tracking down and prosecuting individuals who aren't licensed.

"Training can help people to become better landlords and of course by becoming licensed, landlords will be complying with the law and will avoid prosecution. So it's important for landlords to complete the registration and licensing process as soon as they can,” she added.

She concluded by issuing a stark warning of the consequences of conviction, saying:

“A conviction for a self-managing landlord has serious consequences as a condition of obtaining a licence is that someone is fit and proper to carry out letting and management activities. All those who continue to operate without a licence are putting their future business at risk."

Landlords who have not yet signed up for Rent Smart Wales, can do so through the following link:

South East and North West regions gained buy to let market share on London in 2017

South East makes market share ground on LondonNew data reveals that the gap closed significantly between buy to let applications in the South East of England and London during 2017.

Leading buy to let broker Commercial Trust Limited, reported that the South East saw 3.4% annual growth in application volumes during the year, closing its market share gap with London to just 0.3%, as the Capital saw a decline from 2016.

The London buy to let market has notably felt the effects of recent legislative changes, including stamp duty, while the combination of house prices, rental prices and the rising cost of living have all impacted on investment in the Capital.

The statistics showed that other areas of the UK have attracted more buy to let investment, with the North West seeing a 32.2% increase in purchase applications, while the north east saw a 28.4% growth in applications from 2016.

Commenting on the data, Andrew Turner, chief executive at Commercial Trust Limited, said:

“The traditional dominance of London as a hub for buy to let investment has undoubtedly shifted somewhat during 2017, with more choosing to invest in areas where property prices are cheaper and rental yields higher in light of changes in the buy to let marketplace.

“There is a growing trend for people looking to rent outside central London, to places with good transport links, but where rental prices are lower. This is creating reinvigorated demand in the south east from commuters, while for investors, property prices here are slightly less prohibitive than in London.

“This goes some way to explaining the changing market share dynamics at Commercial Trust Limited, where the south east has continued to gain ground on London and is almost on a par now.

“Elsewhere, the north west and north east continue to attract growth in buy to let applications. Landlords, like tenants, can see the attraction of economically regenerated cities such as Liverpool and Manchester, where more jobs have been created, developing growing demand for rental homes.

“These areas have seen house price growth, but the average cost of a house in the north of England is significantly less than in London, whilst the rental yields outperform the capital. So it is only natural that more landlords are looking north for property investment.

“When you factor in the vast sums of Government investment in places like Hull, Manchester and Liverpool, you get a picture of thriving local economies offering people work opportunities and a lower cost of living than the Capital. This is leading to internal migration to these industry hubs and is in turn developing increased demand in the private rental sector prompting some landlords to identify investable regions.”

Whilst London has seen a fall in applications, its influence should not be underestimated, and combined, London and the south east accounted for over a third of Commercial Trust buy to let purchase applications during 2017.

Rate roundup

Rates round upBelow 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
1.37% then 4.99% Fixed for 26 months Fixed for 26 months £114 60% £2,239 4.69% 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
1.71% then 4.99% Fixed for 26 months Fixed for 26 months £142 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

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