Buy-to-let news to Friday, January 12th, 2018
Landlords benefit from DWP change to Universal Credit
Some landlords are set to benefit from changes to Universal Credit, which aims to eliminate the risk of tenants on these benefits holding up rental payments.
The Department of Work and Pensions (DWP) has confirmed landlords will be able to apply directly for Alternative Payment Arrangements (APAs), rather than having to seek tenant consent (which had been the case previously), following extensive lobbying from the Residential Landlords Association (RLA).
This means that landlords will be able to receive rental payments directly from the Universal Credit scheme, in cases where the tenant is at least two months behind with rental payments.
Under new rules, the tenant will no longer have to give consent and the DWP can now pay a landlord directly, where it is proven that the rent is two months, or more, in arrears.
The changes were introduced on December 20th 2017.
Tenants will have the right to challenge applications, with a seven-day window to dispute or disagree with a landlord request. The APA will not be granted if the tenant can prove that they are not in arrears, or where they are in dispute with the landlord.
The move has been welcomed by the RLA, with vice-chair Chris Town, commenting:
“The latest news regarding APAs is a major step in the right direction, and will improve the operation of Universal Credit for landlords and tenants. That said, further reforms are still needed and we will continue to work with the department to make Universal Credit work better for landlords and tenants alike.”
Could the new few weeks see a surge in remortgages?
Speculation is growing that the next few weeks could see a sharp rise in the number of buy to let landlords seeking to remortgage, with borrowers being urged to speak to specialists in a changing lender environment.
The expectation stems from buy to let activity at the beginning of 2016, when there was a rush from many investors to complete deals ahead of the introduction of the 3% stamp duty surcharge in April that year.
With a raft of buy to let landlords taking out 2-year mortgages at that time, now, two years on, their deal periods will be coming to an end, with the opportunity to remortgage to another deal without penalty.
Consequently, a number of people in the industry are predicting an increase in remortgage enquiries, as landlords look to take advantage of the prevailing low interest rates, rather reverting to their lenders’ standard variable rate.
Andrew Turner, chief executive at Commercial Trust Limited, said:
“With many fixed rate terms likely to end this April, we would expect to see an increase in business, as savvy landlords look to protect their monthly payments by remortgaging to more competitive rates.
“However, whilst interest rates continue to remain low, there may be a number of charges involved in switching to another lender and the Prudential Regulation Authority changes of 2017 have led to stricter lending criteria.
“I would recommend anyone contemplating remortgaging to get in touch with a specialist lender in the first instance to fully understand their options. We work with over 40 lenders and can help to identify not only suitable products but also the implications of moving lender or product.”
Government announces housing changes to address crisis
The Government’s pledges to address the UK’s housing crisis have seen some important changes, with the former Department of Communities and Local Government (DCLG) renamed to the Ministry of Housing, Communities and Local Government (MHCLG).
The move sees Sajid Javid’s powers extended, following his appointment as the new Secretary of State for Housing, Communities and Local Government. Javid was previously Secretary of State for DCLG but his remit now covers housing.
“Building the homes our country needs is an absolute priority for this Government and so I’m delighted the Prime Minister has asked me to serve in this role. The name change for the department reflects this government’s renewed focus to deliver more homes and build strong communities across England,” Javid proclaimed.
The decisions made this week have received a mixed reaction from the housing industry, with Richard Lambert, chief executive officer at the National Landlords Association (NLA), stating:
“Housing strategy should be at the forefront of the Government’s thinking. However, we hope that this works out to be more than just rebranding exercise and that Mr Javid and his department will look to address the housing crisis by genuinely working across all tenures, not by fixating on building more homes.”
Meanwhile, the Prime Minister’s decision to replace Alok Sharma with Dominic Raab, as the new Housing Minister, has also been met with concern in some quarters, not least because he becomes the fifteenth incumbent in the role in just 17 years.
Raab’s predecessor lasted just six months in the role.
“Appointing a new housing minister is a step in the wrong direction for this Government. The industry needs political and economic certainty and stability at this crucial time to make progress on the housing front and bring forward the policies laid out in last year’s Housing White Paper,” commented Félicie Krikler, director at Assael Architecture.
“Understanding and addressing the issues plaguing the market requires time and effort, as does engaging the wider industry,” Krikler added.
“I hope that Dominic Raab can quickly contribute to the political push required towards unlocking the housing market.”
New report highlights the value of tax relief to buy to let landlords
Landlords have received encouraging news that tax relief on their buy to let businesses will remain substantial beyond 2020.
Whilst the past few months have painted a gloomy picture of how tax changes will affect buy to let landlords, a new report from Ludlow Thompson indicates that the drop in tax relief may not be as significant as may be feared.
Total tax relief available for 2017/18 tax year is anticipated to be £17.3 billion, dropping to £16.7 billion in 2020, after the changes to buy to let tax have been fully implemented.
The figures were arrived at, using data based on claims from the latest year’s tax returns (to the year end 31 March 2016), and in accordance with Government estimates of tax relief costings for 2020/21.
Tax relief can be claimed by landlords for a variety of reasons, including the offsetting of rental income costs, including mortgage interest, property repairs, maintenance and renewal costs, legal, management and professional fees; and rates, insurance and ground rents.
However, the amount of relief able to be claimed from mortgage interest is gradually being reduced to 20% by April 2020, sparking concerns about the financial implications this will have for many landlords.
Looking at the data in more detail, the Treasury anticipates an annual rise of £840 million in landlord-related tax revenue by the 2020-21 tax year, following on from its reduction in tax reliefs for mortgage interest payments and property maintenance.
Stephen Ludlow, Chairman at Ludlow Thompson, commented:
“Despite tightening, buy-to-let tax breaks are still very valuable, highlighting that rental property remains a highly attractive investment vehicle.
“Those tax breaks are essential to ensure that landlords continue to invest in maintaining their properties. If the tax breaks are reduced further then landlords will cut their investment in the properties they own – reducing the standard of UK rental accommodation.”
Letting agent fees ban will not happen before spring 2019
A lettings agent scheme has been informed by the Government that a letting agent fees ban will not happen before the spring of 2019, potentially giving landlords longer to work with agents, without the threat of higher charges.
The Government outlined its intentions to introduce a ban on letting agent fees last autumn, with the aim of reducing tenant costs and making the whole rental process more transparent.
However, a subsequent consultation on the topic has proffered a number of industry objections, including concerns that agents would simply increase charges to landlords, resulting in landlords then putting up tenant rental costs.
However, the National Approved Lettings Scheme (NALS) has announced that the Government, via its newly-rebranded Ministry of Housing, Communities and Local Government, has confirmed that a letting agent fees ban will not happen before spring 2019, at the earliest.
Isobel Thomson, chief executive at NALS, announced:
"We're pleased to see more clarity on the timetable for implementation of the ban - it's much needed for our industry and something NALS has long called for.
"The government is currently carrying out pre-legislative scrutiny of the proposed Bill ahead of presenting the Bill to Parliament. While the Bill aims to create a fairer and safer private rental sector for all, NALS doesn't believe this will deliver what the government aspires to and risks doing real damage to the private rental sector.
"NALS urge government to use this time to fully assess the impact of the Bill. It is crucial that government look again at the proposals and consider tenant fees in a broader, coherent framework of regulation for the private rental sector" she concludes.
Below 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|
Important: Lender fee is calculated based on a loan amount of £100,000.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.
*Some lenders offer mortgages with no fees; however, our broker fee of up to £1,198 for Buy to Let first mortgages and up to £2,198 for Buy to Let secured loans will apply.
This table includes both Purchase and Remortgage rates. Speak to our advisors for a personalised recommendation.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.