Buy-to-let news to Friday, December 8th, 2017

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Landlords call for more action on Universal Credit

The 2017 Autumn Budget brought with it welcome news for some landlords, regarding the future handling of rent payments derived from Universal Credit.

The government made an about-turn that will see monies continue to be paid direct to landlords, where this arrangement has been put in place or stipulated by the tenant.

However, a survey of 545 landlords, undertaken by RLA (the Residential Landlords Association) in the days following the Budget announcement discovered that 73% of respondents still have concerns about their ability to recover rent arrears from Universal Credit claimants who are no longer living in their property.

On the flip side, 36% of those surveyed had grown in their confidence to rent to this type of tenant as a direct result of Mr Hammond’s Budget announcement.

Andrew Turner, chief executive of Commercial Trust, had this to say:

“Good news for landlords, albeit for a sub-section of the community, is welcome. I am pleased to see that the government’s recent focus on the private rented sector is resulting in a positive step forward on this matter.

“However, the message in the results of this survey make clear that there are still fundamental concerns for landlords of Universal Credit tenants.

“Getting Universal Credit right is fundamental to all concerned, especially the claimants themselves.

“If landlords lose faith in their ability to secure rent, they will have little option but to withdraw from offering housing to those on such benefits, which has decidedly worrying implications for the affected tenants.”

Tax changes serve as catalyst for portfolio reviews by landlords

Tax changes prompt landlord reassessmentThe loss of tax relief has been cited as a primary catalyst for buy-to-let landlords to review or make changes to their property investment plans, according to new research.

The data from Simple, indicated that 25% of landlords felt that changes to tax relief were the most important influence on their investment strategy, ranking higher than changes to capital gains tax and stamp duty.

18% of landlords put tax relief changes on a par with government legislation, as their biggest overall concern.

However, whilst changes have had an impact on landlord finances, under 10% stated their intentions to reduce their property portfolios.

A majority of landlords (63%) who own two or more properties, declared that the tax changes will not change their plans, with 4.4% of this specific group intending to invest in more property.

Alex Huntley, head of operations at Simple, said:

“We know that landlords are adapting to the changes in the market, and are willing to embrace the challenges and find opportunities to develop more profitable and sustainable portfolios.

“There is no one solution or route, and landlords need to get expert advice tailored to their individual circumstances. But it’s heartening to see the majority of landlords remaining undeterred, and thinking about how to change with the market.”

Huge change for landlords with rentals in Scotland

Rental law changes take effect in ScotlandNew rent laws have commenced in Scotland, which will impact both tenant and landlord rights.

Any new tenancy agreement will now be bound by a new Private Residential Tenancy, which will have no end date and can only be terminated when a tenant gives written notice to their landlord, or if the landlord uses one of 18 grounds for eviction:

Mandatory grounds (if the Tribunal agrees the ground exists the tenant(s) must leave)

  • Landlord intends to sell the let property
  • Let property to be sold by lender (in cases of repossession)
  • Landlord intends to refurbish the let property
  • Landlord intends to live in the let property
  • Landlord intends to use the let property for non-residential purpose
  • Let property required for religious worker
  • Tenant has a relevant criminal conviction
  • Tenant is no longer occupying the let property

Discretionary grounds (if the Tribunal agrees the ground exists they must also agree it is reasonable)

  • Landlord's family member intends to live in the let property
  • Tenant no longer needs supported accommodation
  • Tenant has breached a term of the tenancy agreement
  • Tenant has engaged in relevant antisocial behaviour
  • Tenant has associated in the let property with someone who has a criminal conviction or is antisocial
  • Landlord has had their registration refused or revoked
  • Landlord's HMO licence has been revoked
  • An overcrowding statutory notice has been served on the landlord
  • Tenant is in rent arrears over three consecutive months
  • Tenant has stopped being — or has failed to become — an employee

This new tenancy replaces the former Assured and Short Assured Tenancy agreements.

Existing tenancies will continue on their current agreement, until terminated by either the landlord or tenant.

From now on, any tenant who has lived in a rented property for in excess of six months will by law require their landlord to give at least 84 days’ notice to leave, unless they are deemed at fault.

Landlords will therefore no longer be able to evict tenants on the basis of ‘no-fault’ and tenants will have the right to challenge a wrongful termination.

At the same time, the new rules are aimed at improving the repossession process for landlords, with the old notice to quit and notice of proceedings protocol replaced with a more simple notice to leave process.

Rental increases will be limited to one a year and landlords will be legally obliged to give tenants three months written notice of any such rise, which tenants will have a right to challenge if they deem this to be unfair.

In another change, landlord and tenant disputes will now be heard at a newly appointed specialist tribunal. January 2018 is also the deadline for the compulsory registration of all letting agents to a new code of practice.

Scottish Housing Minister Kevin Stewart commented that the changes will provide greater security and stability for tenants whilst also delivering assurance for landlords, lenders and investors.

“The private rental sector has grown substantially in recent years and now provides a place to call home for 760,000 people. This is the biggest change to the sector for a generation and will bring about significant improvements in private renting, benefiting both tenants and landlords,” he explained.

For more details regarding Scotland’s new Private residential tenancy, visit the Scottish government’s website

Buy-to-let mortgage rates on the rise

Mortgage rates on the riseThe Bank of England’s base rate rise in November has precipitated a significant level of buy-to-let mortgage rates increases, according to Moneyfacts.

The financial data provider has reported that since the base rate increased by 0.25%, the average two-year tracker buy-to-let mortgage rate has risen by 0.20% to 2.43% (as at 4th December 2017).

During the same period, it reports that average two-year fixed buy-to-let rates also went up from 2.89% to 2.93%.

Charlotte Nelson, finance expert at moneyfacts.co.uk, said:

“Variable rates are designed to track Base Rate, so an increase to the two-year tracker rate is little surprise.

“However, not only has the average variable tracker rate increased, so too has the average two-year fixed rate, seeing rates bound upwards and nearing June 2017 levels with the highest monthly rise since April 2015.

“The criteria changes for portfolio landlords and the rising fixed and variable tracker rates will start to eat into the returns of landlords, making many consider whether buy-to-let is still the right option for them. With rates on the rise, it is important that buy-to-let landlords weigh up their options carefully.”

Andrew Turner, chief executive at Commercial Trust added,

“Landlords should certainly take time out to consider their options, but should also remember that these increases stemmed from historically low rates.

“Many landlords have already reassessed their circumstances and we have seen high levels of remortgaging activity over the past twelve months.

“I would urge anyone thinking of making changes to speak to a specialist buy-to-let broker in the first instance, to get the full picture of their options and a breadth of choice in available rates.”

Brokers anticipate buy-to-let stability in 2018

Brokers anticipate BTL stability in 2018New data has revealed that 50% of brokers anticipate that buy-to-let will hold its own and maintain current business levels during 2018, and showed an overall increase in broker confidence, according to specialist lender Paragon’s latest report.

The lender’s latest Financial Advisers Confidence Tracking (FACT) Index report, covering Q3 of 2017, interviewed 199 mortgage intermediaries, taking into account their expectations for next year.

Half of those brokers surveyed expect buy-to-let business to maintain present levels in the next year. On average, intermediaries predict just a 3% drop in the volume of buy-to-let mortgage business they will undertake in 2018. This figure matches the second quarter of 2017, but still significantly exceeds the historic low of 6% seen in Q1 of 2016.

Overall, 9% of brokers who were questioned, reported landlord demand as ‘strong’ or ‘very strong’, representing a 3% increase. This countered the 53% who felt the market was ‘weak’ or ‘very weak’, mirroring the same figure for Q2.

The data showed that remortgaging continued to have an important influence on volumes of buy-to-let business during the third quarter, accounting for 50%.

With interest rates at record low levels, but with rumours of an impending base rate rise, it came as no surprise that brokers reported 56% of remortgage incidences during the third quarter were down to landlords looking to obtain a better interest rate.

This contrasted with a record low of just 33% of landlords who claimed to be remortgaging in order to capital raise.

Whilst remortgaging levels remain high, the number of first-time landlords, which had been on the wane, marginally increased by 1% in Q3 to 14%.

The overall findings for Q3, taking into account all mortgage activity, reflected the highest levels of confidence among mortgage intermediaries since 2015.

John Heron, managing director – mortgages at Paragon, commented:

“Despite a rather uncertain environment intermediaries are seeing higher levels of remortgage activity and at least stable demand from buy-to-let landlords.”

Rate roundup

Rates roundupBelow 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
1.34% then 5.00% Fixed for 27 months Fixed for 27 months £111 60% £2,178 4.67% Enquire
1.70% then 4.90% Variable for 27 months Variable for 27 months £141 60% £25 4.48% Enquire
1.49% then 5.00% Tracker for 24 months Tracker for 24 months £124 60% £2,178 4.76% Enquire
1.78% then 4.99% Fixed for 27 months Fixed for 27 months £148 70% £2,209 4.73% Enquire
1.99% then 5.64% Variable for 24 months Variable for 24 months £165 75% £1,334 5.32% Enquire
1.89% then 5.00% Tracker for 24 months Tracker for 24 months £157 70% £2,178 4.82% Enquire
2.74% then 4.98% Fixed for 24 months Fixed for 24 months £228 80% £1,825 4.90% Enquire
2.89% then 5.19% Variable for 24 months Variable for 24 months £240 80% £295 4.98% Enquire
3.84% then 5.50% Tracker for 24 months Tracker for 24 months £320 80% £500 5.42% 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.

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