Buy-to-let news to Friday, January 26th, 2018
- Published: Wednesday 24 January, 2018
- Category: News update
- By: Andrew Pelis
- Updated: Friday 26 January, 2018
Landlords and agents reminded to use updated How To Rent guide
Landlords and agents have been reminded that they will need to use the latest version of the How To Rent guide, which has just been updated, in order to process Section 21 eviction processes properly.
The document is handed to new tenants by letting agents or landlords who manage properties.
Whilst the new guide, issued by the Government, only contains a minor amendment to an outdated reference to London, Section 21 eviction processes will be rendered invalid if new tenants are provided with an older version of the document.
The changes will affect new tenants and those who are renewing a tenancy.
The new guide can be downloaded at the following address:
70% of portfolio landlords finding financing harder to attain
New research has revealed how last year’s Prudential Regulation Authority (PRA) changes are starting to shape the buy to let industry, with portfolio landlords in particular finding it much harder to attain financing for mortgages.
According to Foundation Home Loans, 70% of landlords with four or more properties – defined as portfolio landlords, said that they have found it harder to secure financing since the second phase of PRA changes were introduced at the end of September 2017.
A further 51% of landlords who own between one and three properties also said that it had become more challenging to obtain a mortgage since the changes.
The PRA changes have introduced stricter lending criteria and have changed the underwriting process for buy to let landlords, with those defined as portfolio landlords subjected to much more stringent affordability tests.
Many portfolio landlords have expressed concerns over issues like, timescales to completion, the range of products available and being declined as a result of the stricter rules.
However, Andrew Turner, chief executive at Commercial Trust Limited remains positive and takes a wider look at the portfolio lending space:
“There is no question that portfolio buy to let lending has become extremely complex, but this is why landlord investors must lean on specialists for a solution.
“A broker will look at the entire portfolio and products from across the marketplace to find a solution. One lender’s products are not the only answer, PRA-regulated lenders are not the only answer, even first charge mortgages are not the only answer.
“A tenacious broker with a lateral train of thought are worth their weight in gold at a time like this, when such large sums of money, which affect your livelihood and life goals, are at stake. Why wouldn’t you seek the best possible advice?”
Rental increases well below general inflation in 2017
The effects of tax and legislative changes may have affected many buy to let landlords financially, but fears that these would lead to many putting up rents sharply have been confounded by a recent report.
New data reveals that 2017 saw stable growth in average rental increases, with rises well below general inflation levels and slower and less erratic than in recent years.
According to data from the latest HomeLet Rental Index, December ended with average rents across the UK increasing by 1.7% compared to the same month in the previous year.
The overall picture for 2017 was one of modest rental price inflation compared to recent years.
2016 was a year of fluctuation for rental increases; the first half of that year saw several months of year on year increases of 4%; while the second half saw a fall. December 2015 saw rents rise 3.7% on the corresponding month in 2014, while the rental price inflation mark during 2015 was never less than 3.5%.
The data for December suggests that rental increases were probably well below the rate of general inflation for the whole of 2017, with the latest consumer price index rate of 3.1% recorded in November.
In December, the average rent for a new tenancy was £907, compared to £892 for the corresponding month in 2016.
The East Midlands saw the highest rate of rental price inflation in December, with an increase of 4.6% year on year, while the South West, North East and Northern Ireland all recorded annual increases of more than 3%.
London too saw an increase of 1.0% from December 2016 to December 2017, despite experiencing five months when rents fell during 2017.
Commenting on the research, HomeLet’s Chief Executive Officer, Martin Totty said:
“2017 was a year in which rental price inflation was modest; we actually saw average rents across the country fall during May and June, and while this was not repeated during the second half of the year, we remain some way off the much higher levels of rental price inflation that prevailed in 2015 and much of 2016.”
Andrew Turner, chief executive at Commercial Trust Limited, commented:
“I am not wholly surprised that rental increases have been modest in 2017, however, I think this picture may change with each year’s reduction in mortgage interest tax relief.
“There have been plenty of reports outlining that some landlords are unaware of the full picture of this change, and may not yet have started to look at their financial picture as we move towards 2020, when the full transition to the new tax regime completes.
“As a broker, our job is to do our part in raising awareness that a review of property finance is a pragmatic step for UK landlords, especially at a time where low rates persist in the buy to let lending space.
“I urge all landlords to seek professional tax and mortgage advice. Having sought a clear picture of your tax position, a specialist buy to let broker with a fine-tuned understanding of the lender space can work to secure a solution to set you up for ongoing financial success.”
Law changes could give landlords greater flexibility over annual gas checks
Gas safety amendments could be on the way, which will give landlords greater flexibility over when they need to carry out annual checks.
Currently going through Parliament, the Gas Safety (Installation and Use) (Amendment) Regulations 2018 (GSIUR)will come into force on 6 April 2018.
Among the proposed changes in the Approved Code of Practice and guidance is the plan to permit landlords to undertake annual gas safety checks in the two months before the due date, whilst retaining the existing expiry date.
It is hoped that this will help to alleviate last minute issues such as gaining access to the property or having to shorten the annual cycle to comply with the law.
The current legislation will remain in force up to and including 5 April 2018, along with the Approved Code of Practice and guidance supporting it - and there will be no change to the legal requirement for an annual gas safety check or for maintenance to be carried out.
For more details, check the HSE website here.
32% increase in buy to let products in 2017
Mortgage competition intensified during 2017, with the buy to let sector recording the biggest increase in the number of new products introduced by lenders.
New data from mortgage software provider, Mortgage Brain, reports that the number of buy to let products available during the year rose to 2,959, an increase of 32% year-on-year.
It was also revealed that throughout the year there were 2,007 new mortgage products introduced, including buy to let and residential, an increase of 24% on the previous year.
Mark Lofthouse, chief executive of Mortgage Brain, commented:
“While our latest data continues to show strong movement in product numbers over the past 12 months, our short-term analysis is showing that product availability could be stabilising with less movement seen in the number of additional products for most types during the last quarter of 2017.
“There’s no doubt, however, that the market is in a much healthier place for all concerned in terms of product choice and availability when compared to the past two to three years. We’ll just have to wait to see what 2018 will have in store for us.”
Andrew Turner, chief executive at Commercial Trust Limited, stated:
“The buy to let industry has undergone significant change over the past couple of years, with landlords having to adjust to new legislation, new taxes and tougher lending criteria.
“However, the returns for getting your maths right and also selecting the right product can still be attractive. Lenders, keen to entice investors, have upped the ante with a range of new products offered at competitive rates or with a variety of niche criteria and incentives.
“The nature of buy to let has undoubtedly become more complex and it is hard for landlords and smaller brokers to keep up to date with the volume of new products on the market.
“That is where the bigger, more established brokers who work with a broader range of lenders on a day to day basis, really come into their own.
“I would urge anyone thinking of remortgaging to a new product, or purchasing a buy to let property, to take the most comprehensive overview of the market by speaking to a large broker like our own, to help match the right product to their circumstances.”
Rate round up
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|
|1.37% 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|
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.