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

A gas ring

RLA warning with less than a month to new EPC rules

The Residential Landlords Association (RLA) has warned landlords that they have less than a month to bring their buy to let properties up to new Minimum Energy Efficiency Standards.

From April 1st, without a legitimate exemption, landlords will not be allowed to let properties under new tenancy agreements, unless the property has a minimum rating of E on an Energy Performance Certificate (EPC). This rule will extend to all tenancies, including existing ones, in April 2020.

The RLA is urging landlords to act now, before time runs out, stating:

“The exemption register is currently open – and revised software to be used by assessors to calculate EPCs, is now being issued, following a campaign by the RLA over ratings for solid wall homes.”

Dave Princep, the RLA’s health and safety consultant, provided advice to the most vulnerable landlords, who own properties rated F and G, but also had warnings for those who own homes rated below C.

“If you have a low EPC, applying for an exemption should really be your last resort.

“Any exemption registered on the database triggers an automatic email to the relevant local authority, informing them that the premises is F or G band.

“The local authority could then take action under the housing health and safety rating system (HHSRS) to force the landlord to carry out improvements works to remedy a cold hazard, with HHSRS unaffected by the exemption register. In short, you may have to do the works anyway.”

Whilst the April 1st deadline is looming large for landlords with lower EPC ratings, Princep also sounded a warning of further likely issues they might encounter:

“The recently published Government’s Clean Growth Strategy indicates that they will be shortly looking at increasing the energy efficiency standards that will apply to the domestic PRS – probably incrementally increasing the minimum EPC band at which premises may be let over the coming years.

“Against this background it is recommended that landlords whose premises are below a band C to consider undertaking all cost-effective energy improvements whenever undertaking major refurbishment or significant works at their properties.

“Those with band E premises should look carefully at their premises and carry out any less disruptive and cost-effective works as soon as they can and they consider scheduling in other energy refurbishments over the medium term.”

In the meantime, Princep suggested that the new software being introduced to measure EPC, could bring some F band properties up to the minimum standard required.

“Landlords with an F band whose rental properties are of solid wall construction should consider undertaking a new EPC assessment once the software is upgraded – which should be anytime soon.

“According to the Building Research Establishment (BRE) around 100,000 PRS homes will be upgraded into Band E and therefore unaffected by the current restrictions. Quite simply members with F & G ratings must take urgent action.”

Five-year BTL rates fall to record low

Five year BTL rates fall to record levelsA new report indicates that the average five-year buy-to-let mortgage rate has fallen to a record-equalling 3.43%, just as many landlords are considering whether or not to remortgage.

Data from Moneyfacts reveals that the current average rate on a five-year buy-to-let mortgage has reached the same level as in October 2017 – and has plummeted from an average of 3.77%, recorded in March 2017.

Moneyfacts’ Charlotte Nelson, commented that many landlords who took out mortgages ahead of the 2016 introduction of stamp duty on second homes, were on two-year deals – and will be mindful of remortgaging at present, with five-year options now more attractive than two years ago, on account of the rates drop:

“Five-year fixed rates are likely to be a popular choice among landlords, as the stress-test that is applied for two-year fixed rates does not apply to the five-year deals. This could well be one of the reasons why buy-to-let lenders have focused competition within this market.

“The price war at the lowest end of the mortgage market shows no signs of abating yet, either. The sub-2 per cent five-year fixed rate barrier has been breached for the first time on record, by The Mortgage Works.”

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

“The era of low buy-to-let mortgage rates has provided property investors with an unprecedented multitude of choices.

“Naturally it is in lenders best interests to monitor changes impacting buy to let borrowing, so that they can develop products to suit the needs of their target audience. Where there are opportunities to provide solutions to prescient issues, the focus will change direction accordingly.

“As a specialist broker in the field, it is our job to look at both the current and future needs of the client, with the aim of setting them up for success over time.

“Investors must consider all the implications of a five year fixed term deal. There may be factors they need to consider that go beyond the ability to borrow a given sum and that is where our expertise and insight comes to the fore.”

Northern Powerhouse cities make a global impact

Northern cities with global property investor appealNew research has placed Northern cities Manchester, Leeds and Liverpool in the highest echelons of global property investment hotspots.

The data, from property investment company IP Global, reviewed some of the world’s leading property markets, with Manchester coming out top.

Investment in the city saw house prices rise in value by 8.6% between October 2016 to October 2017, while rents are predicted to grow by 16.5% from 2018 to 2022.

According to the report, landlords enjoyed gross rental yields of 5.6% at the end of 2017 too, with a large working age demographic, while 51% of graduates chose to stay put in Manchester.

Not far behind Manchester comes it neighbour Liverpool, which has also seen significant investment and a burgeoning private rental sector.

Average rental yields on Merseyside are 6.2%, while house prices have increased by 14% since 2015. Rents in Liverpool are predicted to increase by 17.6% by 2021.

The trinity of English Northern cities in this global report, is completed by Leeds, cited as the largest economy in the UK, outside of London.
Like Manchester and Liverpool, Leeds boasts a large student population (currently 65,000), while strategically grown local industries have helped to swell annual job growth by 6%.

Leeds rents are projected to grow by 18.8% by 2021, by which time, a predicted 90,000 new homes are set to be built to help alleviate the current under supply.

IP Global’s quarterly Global Real Estate Outlook indicated that a fourth English city could join their ranks soon, with Newcastle emerging as another world class opportunity for property investors.

The city has gained economic impetus, having become a hub for digital businesses, with 27,000 people employed in this sector alone.

The data shows that since 2005, there has been a bear 60% increase in the number of rental properties in Newcastle.

IP Global has suggested that if demand outstrips supply of rental homes, Newcastle will join the North’s portfolio of global property investment hotspots.

Landlords receive a boost over Universal Credit

Universal credit boost for landlordsLandlords have received a boost, with news that it will become easier to have the rent element of Universal Credit paid directly, when a tenant is in arrears by at least two months.

The Department of Work and Pensions (DWP), has published a guide containing updated information for those claiming Universal Credit.

Under the new rules, landlords will no longer need to obtain ‘explicit consent’ from tenants who are in arrears with rent, when applying for an Alternative Payment Arrangement (APA). This means that it will be much easier for landlords to have the rent element of Universal Credit paid directly to them.

Prior to the new guidelines, a tenant would have to provide ‘explicit consent’ before a landlord could apply for an APA, which meant that the tenant could delay or refuse consent, leading to significant rent arrears accruing.

The guide outlined the new process – and how tenants may dispute a landlord’s APA application, in the following statement:

“Private landlords can ask for their tenant’s Universal Credit housing costs to be paid directly to them without the need for explicit consent.

“You will be informed that the private landlord has requested that the Universal Credit housing costs be paid directly to them.

“If you are happy for your Universal Credit housing costs to be paid directly to the landlord, you do not need to reply to give your consent.

“The Universal Credit housing costs will then automatically be paid to the landlord each month. If you do not want the rent to be paid directly to the landlord, you can dispute this.

“You will need to provide evidence that you are not in rent arrears in order to dispute the Alternative Payment Arrangement.”

Rates still a key factor in buy to let remortgaging in Q4

Switching rates still a key factor in remortgage activityA new report underlines the growing influence of remortgaging in the buy to let sector, with switching to lower rates a popular choice among landlords.

Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index report revealed that 52% of buy to let transactions in Q4 of 2017 were remortgages, while the number of mortgages for first time landlords fell to a nine-year low of just 12%.

The data indicated that 55% of remortgages were carried out by landlords looking to switch their buy to let mortgage to a better rate, widening the gap with those looking to raise capital, which stood at 35% for the last quarter.

The report also showed that landlords are increasingly looking to secure a rate for a longer fixed period, with mortgage deals of five years or more, accounting for 48% of buy to let mortgage business in Q4, becoming more popular than two year deals for the first time.

Overall, there was a significant landlord preference for fixed rate mortgage products which were responsible for 91% of all cases
John Heron, managing director of mortgages at Paragon, said:

“The results of our latest intermediary research highlight the overwhelming preference that the market has for fixed rate products and increasingly for longer term fixed rate products.

“Much of this is driven by the understandable requirement that landlords have for payment stability into the future against an uncertain economic backdrop.”

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

“The final quarter of 2017 saw considerable upheaval in the buy to let market, with the introduction of new PRA rules, rising swap rates and an increase in the Bank of England base rate.

“It is good to see so many savvy landlords, aware of the historic low interest rates in the market place, that have taken the opportunity to review their portfolios and switch to lower rates.

“With much uncertainty over future interest rates and the loss of income due to tax changes, many landlords are looking to lock-into lower rate deals for a longer period of time, giving them more control over what their outgoings will be and helping to set themselves up for future success.

“I have always said that landlords should take a long-term view when investing in property and it appears that many in the industry are adopting that approach, judging on this report.

“Interest rates remain competitively low at present and Commercial Trust welcomes the opportunity to discuss options with anyone considering remortgaging.”

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
1.39% 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

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