Buy to let news to Friday, June 15th, 2018

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Lender predicts a surge in limited company buy to let

Precise Mortgages is predicting that by this time next year, 38% of landlord buy to let applications, will come through limited companies, rather than individuals (28%).

The lender conducted a survey in March, involving members of the National Landlords Association. It revealed that 42% of portfolio landlords (owning four or more properties) will buy through a limited company, with those based in London, the most likely to incorporate.

Alan Cleary, managing director of Precise Mortgages, said:

“Buying property within a limited company structure has become increasingly popular, particularly among larger professional landlords. Given the predicted rise in landlords switching to limited company status this year, we can expect this trend to continue."

Precise Mortgages, said that 89% of brokers are anticipating an increase in landlords who establish a limited company for their buy to let property business. The lender claims that the main reason for the switch is that individuals will be able to claim tax relief on mortgage interest through a limited company.

However, Andrew Turner, chief executive at Commercial Trust Limited, suggested that landlords should err on the side of caution before deciding to incorporate and to seek appropriate guidance from a specialist tax adviser.

“Each individual has their own unique set of circumstances and incorporation can involve a number of complex issues. When it comes to making decisions based on taxation, it is essential to get advice from a tax expert.”

The Precise Mortgages research also reported that landlords with larger portfolios have greater awareness of the 2017 changes to lending criteria, introduced by the Prudential Regulation Authority (PRA).

It stated that 45% of all landlords are now aware of the PRA changes but that rises to 67% of those who own four or more buy-to-let (BTL) mortgages.

Landlords urged to take further measures over tenant pets

Landlords urged to take further measures over petsLandlords willing to let their property to a tenant with a pet, have been urged to take further measures to ensure they are not left out of pocket by pet damage.

The call comes from the Association of Independent Inventory Clerks (AIIC), who believe that there is a correlation between tenants renting homes for longer periods of their life and the number of tenants who own pets.

Danny Zane, chair of the AIIC and managing director of My Property Inventories, commented:

“It’s clear that the number of long-term lifestyle renters is rising.

“And this means that more tenants will want to keep pets and therefore be on the lookout for a property which they can truly call home for a prolonged period.

“It therefore comes as no surprise if more landlords decide to let to tenants with pets as it will widen their pool of prospective renters in an increasingly competitive market.”

However, whilst acknowledging the potential bigger market available to landlords who will accept pets, the AIIC sounded a cautionary note on what measures should be taken, to safeguard the property.

Amongst the AIIC’s recommendations are to take out more comprehensive landlord insurance policy, raising the amount of security deposit that a tenant with a pet would pay and ensuring that an independent and professionally compiled inventory is carried out.

Zane added:

“Our furry friends can undoubtedly cause more damage to a property, not to mention additional odours and mess.

“Therefore, more comprehensive landlord insurance can provide the required cover and peace of mind should an incident occur at the property, while a higher deposit will help to ensure that tenants are committed to maintaining the property.”

Over the last year, the AIIC has been campaigning for the government to consider compulsory independent inventory reporting in privately rented properties.

Commercial Trust wins ‘Best Broker Firm For Buy To Let’ award

Commercial Trust wins two awardsCommercial Trust Limited was successful in two categories at the recent Legal & General Mortgage Club Annual Awards, winning ‘Best Broker Firm For Buy To Let’ and ‘Best Smaller Firm For Overall Quality’.

The event, taking place at The Guildhall, London, saw many of the country’s top broker firms and lenders assemble under the Legal & General Mortgage Club Membership.

The awards are voted for by lender firms, underlining the importance of broker-lender relationships and customer service.

Commercial Trust works with over 45 lenders and our focus is on ensuring the best buy to let service delivery for every customer, whether your circumstances are straight forward or complex.

Commenting on the award, Jorden Abbs, director of operations at Commercial Trust Limited, said:

“We are extremely proud and delighted to receive these awards and thank everyone who voted for us.

“We put the customer’s best interests and our own integrity at the heart of every application or enquiry that we receive and Commercial Trust’s foundations have been built upon delivering exceptional customer service.

“The buy to let industry has become much more complex recently and in many cases, our holistic approach to client and vendor relationships is helping to smooth the whole process for the customer, from start to finish, so we are delighted to receive industry recognition.”

Tenants swapping rental deposits for insurance

Tenants opt for insurance over tenancy depositsOver 60% of tenants at one of London’s largest new-build rental apartment projects, have opted to pay an insurance premium over the traditional rental deposit scheme.

The announcement, from Criterion Capital, relates to the first phase of its Delta Point project in Croydon, which upon completion, will deliver 404 rental properties to the area.

The insurance is being provided by Zero Deposit, a proptech firm.

Karl Elliott, Head of Portfolio at Criterion Capital, commented:

“There is no question that Zero Deposit is helping to make our properties more attractive to potential tenants, speeding up the process and resulting in happier tenants when they move in.”

There are a growing number of insurance schemes on the market, which claim to save tenants hundreds of pounds on upfront costs for moving home, by paying for insurance cover that will protect a landlord for up to six weeks of rent, but at a fraction of the cost to the tenant initially, unless they leave the property with any issues at the end of the tenancy.

Among the prospective benefits for landlords is that an insurance premium offers greater affordability to many tenants in regards to moving home, potentially broadening the number of tenants available to a landlord and helping to reduce the risk of void periods, when the property lies dormant.

However, tenants with an exemplary record, may find that they are out of pocket, by paying a one-off charge for insurance, as opposed to paying a deposit which would traditionally be returned in full if the property is vacated in good condition.

Furthermore, landlords may wish to clarify exactly what the insurance policy covers and how easy it is to make a successful claim should the worst happen.

Buy to let market share grows in Q1

Buy to let market shares increased in Q1 of 2018Buy-to-let investment showed its resilience in Q1 of 2018, increasing its market share of new loans to 14.1%, new data has revealed.

The latest MLAR data from the Bank of England, based on information provided by around 340 regulated mortgage lenders and administrators, indicated that buy to let’s market share rose for the first time since the beginning of 2017.

The success of buy to let was in contrast to overall mortgage lending, which decreased in comparison to Q4 of 2017.

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

“2018 got off to a very positive start with many buy to let landlords investing in property, despite the challenging environment.

“Whilst some landlords have undoubtedly been put off by the changes to the industry, those who have adapted to the new rules around taxation, underwriting changes, the introduction of Minimum Energy Efficiency Standards and the new HMO licensing laws, can still make a profit from buy to let.

“The market remains strong, with rental demand and rents going up in many areas, while in some regions, house prices have fallen, offering landlord investors investment opportunity.”

Wales set for letting fees ban

New Letting Fees Bill set for WalesThe Welsh Government is set to introduce new legislation which would restrict the types of charges that landlords and letting agents could apply to private tenants in the Principality.

Under the proposed Renting Homes Bill, fees for viewing properties, inventory checks, signing contracts or tenancy renewals would be banned, with charges restricted to rent, tenancy deposits or tenancy breaches.

Under the plans, offending landlords or agents would face fixed penalties of up to £500, in addition to unlimited fines and possibly the loss of their landlord licence.

Housing and Regeneration minister Rebecca Evans, stated that the proposals are aimed at creating a fairer environment for tenants:

“In recent years we have seen a significant increase in the number of people renting in Wales. The private rented sector now accounts for 15% of all housing.

“This Bill builds on the work we have already done here in Wales through the Housing and Renting Homes Acts to ensure that those wishing to rent in the private sector can expect high standards, fair treatment and transparency.

“Fees charged by letting agents often present a significant barrier to many tenants, especially those on lower incomes.

“The Bill will mean that tenants no longer face significant upfront fees when they start renting. In most instances they will only need to pay their monthly rent and a security deposit.

“No longer will tenants be charged for an accompanied viewing, receiving an inventory or signing a contract. No longer will they be charged for renewing a tenancy. And no longer will they have to pay check out fees when they move out.”

London shows strong annual rental growth in new report

London shows good annual rental growthGreater London’s buy to let investment appeal has been enhanced by a new report, showing that the capital showed the strongest year on year regional growth in rental increases.

The HomeLet Rental Index for May 2018, showed that London rents increased on average, by 5.6% from May 2017, with the average monthly rent costing £1,586.

Whilst the London figure was the stand out, across the UK, there was a 2.0% increase in rent compared to a year ago, suggesting that there remains plenty of potential within the buy to let sector, for savvy investors.

The survey also revealed that rents increased across eleven of the twelve UK regions over the past 12 months, with the UK average monthly rent now standing at £919 (up from £901 in May 2017).

Behind Greater London, Scotland (4.5%) and Northern Ireland (4.1%) saw the greatest annual rental increases, followed by the West Midlands (3.0%).

Within Greater London, there was spectacular rental growth from May 2017 to May 2018, across several boroughs, with Camden & City of London reporting 18.0%. This was followed by Harringey & Islington (10.7%) and Westminster (9.1%).

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

“This report is really encouraging news for buy to let investors, as it demonstrates that there is still scope for rental growth in the capital, as well as the rest of the UK.

“Landlords in London in particular, have endured tough times in the buy to let market, with the price of property and tougher affordability criteria making it much harder to demonstrate that rental yield can cover a buy to let mortgage.

“These figures – along with continued rental demand, offer encouragement to buy to let landlords.”

Rates round-up

Best buy to let ratesBelow 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
1.55% then 4.90% Variable for 26 months Variable for 26 months £129 60% £1,300 4.57% Enquire
1.49% then 5.00% Tracker for 24 months Tracker for 24 months £124 60% £2,178 4.76% Enquire
1.69% then 5.99% Fixed for 26 months Fixed for 26 months £140 70% £2,534 5.42% Enquire
1.60% then 4.90% Variable for 26 months Variable for 26 months £133 70% £1,300 4.58% Enquire
1.69% then 4.99% Tracker for 25 months Tracker for 25 months £140 75% £2,355 4.77% 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% £794 5.02% Enquire
3.85% then 5.35% Tracker for 24 months Tracker for 24 months £320 80% £2,155 5.43% Enquire
4.19% then 4.95% Fixed for 24 months Fixed for 24 months £349 85% £1,818 5.10% 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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