Buy to let news to Friday, May 11th, 2018

Bank sign carved in stone

Good news for landlords as base rate is held

The Bank of England base rate has been held at 0.5%, delivering good news for landlords and reducing the short-term prospect of buy to let lenders hiking their interest rates.

The Bank’s Monetary Policy Committee voted by 7-2 to hold the base rate on May 10th.

You can read their full announcement by clicking here.

Commenting on today’s announcement, Andrew Turner, chief executive at Commercial Trust Limited, said:

“Today’s decision will come as a relief to many landlords who feared seeing their lenders put up interest rates in reaction to a base rate rise.

“However, it should be remembered that the base rate is only one consideration when lenders come to setting rates and the Bank’s long-term projection suggests there will be further base rate rises in the future.

“With a growing amount of market choice, the buy to let market place has become somewhat confused and it has become more challenging to find the right product if you are an investor.

“By speaking with Commercial Trust, whether you are looking to invest for the first-time, or you are an experienced landlord reviewing your portfolio and options, we can help to find the best option to suit your circumstances.”

The next MPC meeting takes place on June 21st.

Portfolio landlords achieved best yields with HMOs and MUFBs in Q1

HMO and MUFBs return best yieldsA new report has shown that portfolio landlords, who own Houses in Multiple Occupation (HMOs) and Multi-Unit Freehold Blocks (MUFBs), achieved the best buy to let yields in Q1 of 2018.

The syndicated research (from BDRC Continental, on behalf of Precise Mortgages), showed that overall, average yields dipped to 5.8% (a 0.1% fall) from Q4 of 2017.

Of the two, HMOs proved the strongest property type and average rental yields were 7.1%, while MUFBs yielded on average 6%.

Portfolio landlords, owning between 11 and 19 properties, faired best with average yields of 6.7% in the first quarter of the year, while those owning one property saw average yields of 4.8%.

Regionally, landlords who owned portfolios in the North West, saw the highest rental yields, reaching 6.7%.

Alan Cleary, Managing Director of Precise Mortgages, said:

“As HMOs attract multiple tenancies, gross rental income tends to outstrip single lets and rental income is more secure even if one tenant leaves a void.”

“Experienced landlords are looking to rebalance their portfolios and there is a real opportunity for brokers to support them to work with specialist lenders who are prepared to be flexible and have expertise across the widest product set.”

Landlord confidence starting to grow in Q1

Landlord confidence on the upA new report suggests that landlord confidence is either stable or growing on a number of buy to let issues, with those in the East of England the most positive.

Research for quarter 1 of 2018, conducted by BDRC1, on behalf of Paragon, hints that many landlords are now feeling more positive, having seen a number of tax and legislative changes over the past couple of years.

In the East of England, 53% of landlords said they felt positive about their lettings business in the coming three months and these views were supported by 8 out of 10 saying that rental demand was either stable or growing in the region.

Rental demand was also reported to be buoyant by landlords in the East Midlands (81%) and West Midlands (76%) and these two regions also featured prominently in the top five areas for rental yield and capital gains in Q1.

John Heron, Managing Director of Mortgages at Paragon commented:

“After an unprecedented level of change, it’s encouraging to see landlord confidence stabilising this quarter. At a regional level, the East of England and the Midlands look well supported, with encouraging data on tenant demand, yield and capital gains while the London market adjusts its footing after many years of strong growth.”

Client Money Protection to offer landlords more security

Client Money Protection to become compulsoryFrom April 1st, 2019, landlords and tenants in England will receive greater protection from unscrupulous agents.

The Government has confirmed that from April 1st, membership of a Client Money Protection scheme will become compulsory for all property agents in England. Those failing to join a scheme could face a maximum penalty of £30,000.

The regulations pertaining to Client Money Protection, are covered within The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018 and The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2018.

The draft impact assessment for the new regulation, estimates that 44% of letting agents are already signed-up as members of an existing CMP scheme.

The news has been welcomed by industry bodies, with David Cox, chief executive at ARLA Propertymark, stating:

“After a long fight, ARLA Propertymark’s campaign for mandatory Client Money Protection is finally won. This is a vital step forward in improving consumer protection in the rental sector; probably more so than the myriad of other laws passed over the last two decades.

“We look forward to working with the government to guarantee that the level playing field we’ve fought so hard to create becomes a reality on April 1 next year” he adds.

Isobel Thomson, chief executive of the National Approved Letting Scheme (NALS), described the news as a milestone after too many cases involving “rogues and criminals taking money from innocent tenants and landlords.”

Gerry Fitzjohn, chairman of The Property Ombudsman board, said:

“Ultimately it will make the sector a fairer place for consumers, and we look forward to this coming into effect next year.”

Meanwhile, last March, when news of the Government’s plans were first revealed, Alan Ward, Chairman at the Residential Landlords Association (RLA), commented:

“This is great news for landlords and tenants alike. Landlords should be concerned about agents having control over money due to them and formal schemes offer protection against any criminal activity that would deprive them of this cash.”

FCA highlights the benefits of bigger buy to let broker firms

Benefits of larger broker firmA new report from the FCA has highlighted that borrowers who use a smaller buy to let broker firm could end up paying up to £400 more in the first year, due to the broker’s lender limitations.

The FCA’s latest interim report on the mortgage market, highlighted that brokers working with fewer lenders, on average sell more expensive products.

It commented:

“Based on our data analysis, we found that intermediary firms that use a small number of lenders recommend more expensive products on average compared to intermediary firms who use a greater number.

“The price difference could be around £400 for the first year of the incentivised period of the median loan amount.”

The report also revealed that approximately two-thirds of mortgage brokers work with a restricted panel of lenders.

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

“Commercial Trust is a top 5 broker in the UK in our specialism. We work with in excess of 45 high street and specialist buy to let lenders, who between them have thousands of products.

“We are lucky to be able to offer a myriad of financial solutions to landlords, at a time when greatest choice clearly makes all the difference.

“What’s more, we save our clients the unenviable challenge of gleaning which product most closely matches their requirements.

“We use our expertise and product knowledge to identify and secure a terrific deal on each client’s behalf, and our fantastic mortgage administration team take as much of the hard work out of their hands, liaising with all parties to achieve a timely and stress-free completion.

“Whether you are a professional landlord with a large portfolio, a landlord running Houses of Multiple Occupation (HMOs), operating a limited company, or even an intermediary struggling to make sense of a complicated market, we welcome the opportunity to help.”

London rental growth outstrips national average

London rental growth outstrips national averageApril 2018 saw a healthy 1.5% year on year increase in rents across the UK, but Greater London stood out, with an impressive 4.5% growth on April 2017’s average rent.

HomeLet’s April Rental Index revealed that the average rent in the UK is now £918 per month, while in Greater London it has increased to £1,588 a month.

There was significant variance in rental increases across different boroughs in the capital. The highest annual variance came in Harringey and Islington, which achieve 16.7% annual rental growth. Croydon was next at 12.3%, followed by Hackney and Newham at 11.9%. Meanwhile, Kingston Upon Thames, Merton & Sutton saw rents fall by 0.7%.

Croydon’s growth, however, did not alter its status as the London region with the lowest average monthly rent, at £1,163 a month. Conversely, Lambeth saw the highest average rent per month at £2,113.

In total, 9 of the 12 UK regions saw rental growth in April. This was the second consecutive month average annual growth occurred nationally and April’s figures also saw a 0.7% increase from March 2018.

After London, Scotland was the next best performing region, with a 3.3% annual increase in rent, followed by the West Midlands (2.7%) and East Midlands (2.5%).

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

“These statistics offer encouraging news for landlords, at a time when rental demand continues to soar, but buy to let costs have mounted. Increasing rents will help to alleviate those financial pressures.

“We continue to see positive reports about the state of the London buy to let market and what these figures show, is that shrewd buy to let investment in the right areas of the capital are rewarding. It does require a little homework to pinpoint the right area and property.

“The same is true elsewhere in the UK and whilst rental increases were more modest outside London, the overall picture is one of growth in most areas.

“Buy to let investment has become more complicated in recent times and I would encourage anyone looking to purchase property to ensure they shop around, given the sheer volume of products now available.

“To that end I am confident that Commercial Trust can help, as we work with over 45 lenders offering thousands of products. We help by pinpointing a deal most closely aligned to your needs and circumstances, taking into account rates, terms and associated costs.”

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