Buy to let news to Friday, May 18th, 2018

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Survey reveals overwhelming mortgage customer satisfaction with brokers

A new report has revealed that 81% of UK home buyers over the past 12 months, would use a mortgage broker if they were buying again.

The overwhelming support for brokers and the role that they play in the mortgage application process, was highlighted by Legal & General’s Mortgage Myths campaign.

In addition to existing homeowners, 75% of first-time buyers said that they too, would likely use a mortgage broker if they do buy property in the next six months.

The Legal & General Mortgage Club research also indicated that house buyers are aware of the services a broker can provide in more niche circumstances:

71% said they would seek broker advice if they had a poor credit rating;

62% would use a broker if they were self-employed or a contractor;

67% would seek broker help if they were looking to invest in a buy to let mortgage

Customer awareness of the broker role was further evidenced by the 53% of respondents who had made a recent purchase, using a mortgage broker in order to access a wider range of products.

With regulatory change impacting mortgage applications over the last couple of years, 33% of consumers also felt that using a broker helped to alleviate the hassle of filling in forms.

The human element was highlighted as another benefit, with 36% feeling that having access to a broker to discuss concerns, provided an extra line of reassurance.

Kevin Roberts, Director, Legal & General Mortgage Club commented:

“These figures should come as a positive message for mortgage brokers across the UK, showing that there is clearly a recognition amongst consumers about the value of professional advice, whether they are an existing homeowner, a first-time buyer, a borrower with a complex income or a prospective landlord.

“However, while this is clearly positive news, there are still buyers out there that either remain unaware of the role of a broker or who have misconceptions about the value they can provide. As an industry, we need to reach out to these consumers and use campaigns like Mortgage Myths to showcase the important role that brokers play in helping borrowers across the UK.”

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

“This survey represents a fantastic endorsement of the role of the broker and it is good to see customers recognise the vital added value that a broker firm can provide.

“At Commercial Trust Limited, we work with over 45 lenders and have access to thousands of buy to let products on the market.

“But it is not just about the breadth of product advice that we give. Our ethos is to deliver world class customer service, to help clients from first enquiry right to their next renewal date and beyond.

“Our success thrives on nurturing long-lasting relationships, with clients who rely implicitly on our expertise and ongoing support.

“It is no accident that “Trust” is in our company name, we work very hard to inspire it in our clients, through our work on their behalf.”

Rental credit report enhancement moves closer

Rental credit history reporting a step closerA move to allow tenant’s good rental behaviour to be included in their credit reports moved a step closer, as the Creditworthiness Assessment Bill passed through the Committee Stage, at the House Of Lords on May 11th.

The proposed legislation had its First Reading in June 2017, with a Second reading last November. The Bill will move to the House of Commons later this year.

The legislation will help tenants to improve their credit scores, in theory making it easier for them to obtain a mortgage in the future.

It may also prove useful to landlords and letting agents when assessing the creditworthiness of potential tenants.

Private rental sector takes up the slack from falling mortgage levels

PRS takes up slack from falling mortgage levelsA new report suggests that the UK’s expanding private rental sector is filling the gap caused by fewer people being able to afford mortgages.

The latest annual Family Resources Survey, from the Department for Work and Pensions, shows that the number of people aged between 35 and 44 years-old, living in private rental property, has doubled since 2007, to 26%, whilst the number of people renting overall, increased substantially from 2007 to 2017.

Those in their late forties and early fifties are renting far more often than ten years ago, when just 8% were in private rental accommodation. That number has grown to 14%.

But this trend was not unique to older people, with the percentage of people aged 16-24 renting privately, rising from 55 per cent to 73 per cent, while those aged 25-34 years-old increased from 28 per cent to 46 per cent.

It appears that the private rental sector is very much taking up the housing slack, as fewer people look to buy their own homes. Affordability has been cited as a key determinant, putting people off purchasing.

The report indicates that across all age groups, with the exception of those aged 65 or older, there was a decline in mortgage purchases over the past decade.

This was most marked among the 16-24 age demographic, where in 2007, 18% were looking to buy. That fell to just 7% in 2017. The 25-34 years –old group also saw a steep fall from 52% to 33%, while the proportion of people aged 35 – 44 years old taking out a mortgage, has slipped from 60% to under 50%.

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

“The findings of this report make for interesting reading and certainly confound the critics suggesting that buy to let is dead. Nothing could be further from the truth, as these statistics bear out.

“In fact, it could be argued that there has never been a greater need for a vibrant buy to let market and landlords.

“House prices are clearly locking many people out of the mortgage market and as an alternative they are turning, in increasing numbers and across all demographics, to renting.

“In such an environment, perhaps it is time for the government to revisit its landlord policies around taxation and legislation. UK landlords have had a challenging time over the last couple of years, with many discouraged from making further investment. This report highlights that there has never been a more important need for them.”

Meanwhile, David Smith, policy director at the Residential Landlords Association, has called for government to make it easier for landlords to offer prospective tenants greater security, through longer tenancies.

He said:

“Mortgage lenders often prevent landlords offering longer tenancies.

“The growth in the number of older tenants is one factor behind an increase in demand for rented housing at a time when an increasing number of landlords are not investing in more properties or are selling off homes because of Government tax rises on the sector.

“This is making it more difficult in areas of high demand for tenants to find decent accommodation. The Government is increasingly asking the private rented sector to house people in categories that it was never intended or structured to do. Ministers need to undertake a comprehensive review to ensure the support is in place for landlords to meet the changes in the types of tenants in rented housing.”

Industry body questions need for further electrical safety rules in PRS

RLA says no need for more electrical regulations in PRSThe Government has been informed that there is no requirement for it to increase rules around electrical safety in the private rental sector.

The Residential Landlords Association (RLA), responding to the Government’s consultation on electrical safety, expressed the opinion that existing statutory landlord laws are already sufficient.

Under the present legislation, a landlord must ensure that electrical systems are safe, including sockets and light fittings and that all appliances, such as cookers and kettles, have also been safety-checked.

The RLA suggests that The Housing Health and Safety Rating System’s (HHSRS) Operating Guidance, highlights an extremely low risk to tenants, from dangerous electrics.

The organisation’s comments follow the Government consultation, conducted by the Electrical Safety Standards Working Group in November 2017, which concluded that mandatory electrical installation checks should take place at least every five years.

It is a decision that the RLA is opposed to, stating:

“The RLA believes a five-yearly test regime is not appropriate for single occupancy properties and small blocks of flats, particularly if electrical safety features are present, such as PVC wiring and RCDs.

“It also opposes suggestions that inspections should be at inspectors’ discretion.

“This opinion is echoed by the Health and Safety Executive, which is also strongly against inspectors having discretion, partly because they have a financial interest in more regular periods.”

One area where there is agreement, concerns the recommendation of a new scheme which recognises competent and qualified electrical inspectors and testers, to eradicate rogue contractors. A similar scheme already exists in gas safety protocol, where mandatory tests have to be carried out by a Gas Safe registered engineer.

Tax incentives for longer tenancies debated in Parliament

Government looks at tax incentives for longer tenanciesThe Government is set to launch a consultation, looking at ways to support buy to let landlords who are willing to offer tenants longer tenancy agreements.

This emotive topic was debated in the House of Commons on May 15th, with Sir Robert Syms, Conservative MP for Poole and Former Chair of the APPG for the PRS, calling for landlords to receive tax incentives if they are prepared to offer longer tenancies.

He commented:

“Somehow the Government, perhaps through tax incentives or capital gains incentives, ought to try to ensure that leases of three years or five years are available to families.

“That would take some of the pressure off families with children, who would feel much more content with their lot.”

During the debate, James Brokenshire, the recently-appointed Housing Secretary, said that the Government “will shortly consult on options to support landlords to offer longer tenancies to those who want them”.

There has been cross-party support for new laws allowing landlords to offer longer tenancy agreements.

The Shadow Housing Secretary, John Healey MP, outlined Labour’s policies for the PRS which are, he said, “legal minimum standards, longer tenancies, a cap on rent rises and local licensing to drive out the rogue landlords.”

However, some buy to let lenders currently restrict the length of tenancy agreements at the mortgage application stage.

Furthermore, concerns have been raised that longer tenancies provide a greater risk to landlords, if a tenant stops paying rent, while a legally binding tenancy agreement could potentially make it harder for a landlord to increase rent during a fixed period, even if their mortgage payments increase.

The Residential Landlords Association (RLA), recently conducted a survey of 3,000 landlords, with 63% stating that they would agree to offer tenancies of 12 months or more, if the tenant requested this.

Rate round-up

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
1.37% then 4.99% Fixed for 27 months Fixed for 27 months £114 60% £2,239 4.67% Enquire
1.55% then 4.90% Variable for 25 months Variable for 25 months £129 60% £1,300 4.59% Enquire
1.49% then 5.00% Tracker for 24 months Tracker for 24 months £124 60% £2,178 4.76% Enquire
1.71% then 4.99% Fixed for 27 months Fixed for 27 months £142 70% £2,239 4.73% Enquire
1.60% then 4.90% Variable for 25 months Variable for 25 months £133 70% £1,300 4.60% 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 5.09% Variable for 24 months Variable for 24 months £240 80% £989 4.95% Enquire
3.85% then 5.35% Tracker for 24 months Tracker for 24 months £320 80% £5,485 5.71% 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.