Buy-to-let news to Friday, March 16th, 2018
Landlords urged to remortgage early
Buy to let landlords coming to the end of two year fixed rate deals, have been told to remortgage early or risk higher mortgage rates and getting caught up in an administrative backlog.
An anticipated spike in remortgage buy to let business, dating back to the 2016 rush to beat the introduction of the stamp duty surcharge on second homes, could put added burden on lender administration and result in mortgage rates rising.
In March 2016, 29,100 buy-to-let purchases went through, as landlords acted to avoid paying the 3% stamp duty surcharge, which took effect from April 1st. Many deals processed at that time were for two years, meaning lots of landlords are likely to look to remortgage in the coming weeks.
Andrew Turner, chief executive at Commercial Trust Limited, commented:
"Reviewing remortgage options, on the run up to the expiry of an initial rate, is a fundamental part of savvy buy to let investment.
"Reversion rates are commonly higher, so it is always possible a cost saving may be available from a new deal.
"Many investors, for ease, may only look at deals from their current lender; but, at a time when there has been so much change in the industry, of which tightening of affordability calculations is particularly prescient, a wider view of the market can ensure the right investment choice is made.
"There are still a worrying number of landlords who are still unaware of the Prudential Regulation Authority changes to buy to let mortgage affordability calculations, which may result in an unexpected picture of remortgage options for some landlords when the time comes to remortgage – especially if raising capital is a requirement for the next deal.
"However, acting sooner rather later will give investors the time to assess their options, and as a specialist broker it is Commercial Trust’s job to overcome any hurdles our clients encounter.
"The majority of lenders are regulated by the PRA, but not all are, which opens a door of opportunity for some investors.
"We take a lateral view of the market to find a great investment option for our clients, and we are lucky to have a lender within our group who takes a very tailored approach to areas of niche lending.
"Commercial Trust welcomes the opportunity to help any landlord looking to remortgage. As one of the UK’s leading buy to let specialists, even if your scenario is a challenging one, if a solution exists I can confidently say we have the expertise and tenacity to find it."
Scottish Labour proposes rent controls
Landlords in Scotland could be subjected to a new points-based system, imposing rental controls linked to average wages, under new plans from the Scottish Labour Party.
Scottish Labour leader Richard Leonard, told delegates at the party’s spring conference, of his vision to introduce a new ‘Mary Barbour law’ aimed at limiting rent and giving tenants more power to challenge unfair rents.
Mary Barbour was a Red Clydeside political activist remembered for her role in the rent strikes of 1915.
Leonard described a home as a “basic fundamental human right” and said he wants to safeguard that “no one is forced to rent a home that pushes them into poverty”.
Amongst his other proposals is action to improve health and safety and energy efficiency standards in the Scottish private rental sector.
Leonard’s call for rent controls in Scotland, comes just a few months after Labour leader Jeremy Corbyn proposed a rent cap based on models adopted in other countries.
Shelter’s chief executive Polly Neate did not welcome Mr Corbyn’s proposals, stating at the time,
“What ends up happening is landlords will just sell because they can’t make any money.
“That actually exacerbates the crisis, because you end up with an even greater housing shortage.”
Buy to let lending at its lowest percentage since 2013
The Bank of England (BoE) has released its quarterly statistical report “Mortgage lenders and administrators statistical release – 2017 Q4”. In it the report shows that lending in the buy to let sector was down to 12.7% in quarter 4 of 2017, its lowest percentage since quarter 3 in 2013.
The implications are that the stamp duty surcharge and reduction in mortgage interest tax relief have played a heavy toll on investors attitudes to the market.
Over the last two decades lending for buy to let in quarter 4 was 14.35% in 2016 and 16.25% in 2015, which is a year on year drop of just over 11%.
But what of the future?
Jorden Abbs, director of operations at Commercial Trust gives his view.
“It was inevitable that the tax changes impacting buy to let investment would result in a significant reaction from investors, as they come to terms with the new picture of the industry.
“For a lot of years, buy to let has been a relatively simple investment route, affording generous returns. Whilst these changes have introduced an additional layer of complexity and perhaps narrowed the extremes of profitability it once enjoyed, it still offers significant opportunity for competitive and respectable returns.
“The requirement for UK rental properties remains strong.
“Now is the time to turn to experts to bring the ease back into buy to let investment. Challenge Commercial Trust to find you a great deal on a buy to let mortgage; it is a challenge we accept, and relish, on a daily basis.”
IMLA urges government to back off from buy to let
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), has urged the government to take time to assess the impact of both its own, and regulatory intervention, in the buy to let sector.
With net investment in buy to let falling 80% between 2015 and 2017, now sitting at £5bn, stamp duty and mortgage interest tax relief have been widely interpreted as fuelling this outcome, put in place in an effort to rebalance owner-occupation with that of the private rental sector.
Whilst acknowledging that some impact has been made in this vein, Ms Davies, on behalf of IMLA, has called for “a period of consolidation to allow the changes to work through and for government to resist introducing further changes in the short-term."
She went on to highlight a redirection of focus that IMLA believes the government should take by instead building new homes.
“Measures which tinker with the levels of owner-occupation versus PRS will in practice do little to benefit either – what is urgently needed is a properly thought-out, cross-departmental programme for new-build.”
Andrew Turner, chief executive at Commercial Trust echoed a similar sentiment.
"A great deal of focus and blame has been placed at the door of UK landlords for the lack of housing in this country. However, for decades’ successive governments have struggled to meet targets for the building of new homes.
“The contribution of the private rental sector to housing in the UK should not be underestimated, it is a vital housing solution for huge number of people.
“I share the hope of IMLA that the government takes time to allow the full outcome of the changes to become clear. It may become apparent that some have been a step too far.”
New standards for HMOs from October
October will bring about new standards for HMO’s (Houses of Multiple Occupation). The new standards address overcrowding, minimum rooms sizes and the management of household refuse.
On 15th March 2018, the government laid before parliament the Draft Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018, which will affect landlords seeking new HMO licences from 1st October 2018.
Minimum floor space for bedrooms
From October, single occupancy bedrooms for over 10-year old’s must be a minimum of 6.51 square metres.
Where two people over 10-years old will share a bedroom, floor space must be a minimum of 10.22 square metres. For children 10-years old and younger, the minimum will be 4.64 square metres.
Maximum occupancy for bedrooms
The regulations will also require the licence holder to ensure that the maximum number of occupants per bedroom, as stipulated in the licence, is adhered to, alongside stipulations as to the age of the person occupying the room.
Another focus for the new standards is the sufficient provision of bins, to ensure that household waste is appropriately disposed of and stored prior to collection.
The penalty for failing to meet the requirements is a hefty fine.
In the same month as the new standards become part of HMO regulation, other changes mean that more landlords will become subject to HMO licensing.
The changes are set to tackle overcrowding and poor standards amongst rogue landlords.
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|
|1.39% 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|
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.