Buy-to-let news to Thursday, March 29th, 2018

older couple comparing buy to let mortgages

Number of over 60s renting privately increasing

Fresh data indicates that there has been a big increase in the number of people over the age of 60, renting in the private rental sector over the last decade.

Information from the Centre for Ageing Better, shows that in 2007, a total of 254,000 people over 60 were in private rental accommodation. However, that figure has risen to 414,000 today, with expectations that it is likely to rise to as high as a third of people over 60, by 2040.

Gillian Girling, chief executive of Girlings Retirement Rentals, said:

“We’re receiving more enquiries from retired people looking to downsize from a family home and rent a manageable sized apartment in a specialist retirement development. Such developments are designed for older people and most come with assured [lifetime] tenancies.

“Renting can make financial sense too, allowing people to use the capital from a home sale to invest, gift or spend. With renting, they also don’t have to pay any property maintenance costs.”

The growth in this segment of the Private Rental Sector’s audience is perhaps unsurprising when looking at ONS (Office for National Statistics) statistics. In 2006, a similarly aged segment of the UK population (those aged 65 and over), comprised 9.7 million people.

Wind that forward ten years and that figure had grown to 11.8 million people.

So, whilst lifestyle choice appears to be influential, it seems likely that our aging population is also a significant factor.

Either way, UK landlords could arguably expect to see more demand from tenants of this type.

Landlord yields remain strong in Scotland

Yields still strong in ScotlandRental growth in Scotland slowed during February, but yields remained strong according to new data.

According to the Your Move index, average rents north of the border rose 0.7% in the year up to February 2018, reflecting a slowdown in rental growth rate.

This equated to an average rent of £569 a month in Scotland, despite significant regional differences.

The latest report also reflected good news for landlords, as yields stabilised during February, with the average property returning 4.7%, the same mark as in January.

Whilst the Scottish yield was still down on its 2017 average, according to the index, it continues to outperform England and Wales, where the average yield for February was 4.4%.

“While growth has slowed compared to recent times, the Scottish market continues to grow at a healthy and steady pace,” said Brian Moran, lettings director of Your Move Scotland.

“Yields remain strong compared to the average found in England and Wales, which will provide further encouragement to landlords looking to invest further. The outlook remains positive, although all landlords should check that their current letting agent is compliant with new rules from the Scottish Government,” he added.

Scottish housing minister warns of a landlord exodus over section 24

Scottish housing ministers warns of landlord exodus over taxA senior Scottish politician has warned the UK treasury of a potential exodus of Scottish landlords over the loss of mortgage interest tax relief, under section 24.

With landlords starting to see the effects of the Government’s actions in their tax returns, Scottish housing minister, Kevin Steward, MSP, has reportedly written to the chief secretary to the UK treasury, warning that many landlords are considering leaving the sector.

He wrote: “…in recent engagement with private landlords in Scotland, many have highlighted to me that this change could result in them leaving the sector. Such concerns were evident at the recent (SAL) Scottish National Landlord Day conference, where landlords highlighted it as their biggest concern within the sector at the present time…”

The letter reflects upon a similar tax scenario in Ireland in 2009, which resulted in many landlords increasing rent to try to offset their increased tax bills.

Due to the legislative structure, this particular rule is determined by UK Government and the Scottish Government cannot reverse the decision, which will see landlords unable to claim mortgage interest tax relief from April 2020 (and only able to claim this at reducing rates to this date), instead claiming a basic rate allowance.

Sharp fall in rental homes managed by letting agents in February

Sharp fall in rental homes managed by letting agentsA new report indicates that there was a 5% fall in the number of rental homes managed by letting agents in February.

According to the ARLA Propertymark February Private Rented Sector Report, letting agents were managing an average of 175 rental properties in February, down from 184 in January – and the lowest amount in 21 months.

However, the data revealed regional variation, with agents in Scotland managing an average of 254 properties, while in London, the number was just 128.

February also saw an overall fall in demand for rental properties, with letting agents registering 61 prospective tenants per member branch, a 13% drop from January, when the average was 70. Once again, regional differences were marked, with Wales recording an average of 166 new registrations and Scotland seeing only 27 per registered branch.

A wane in demand was also evidenced by an increase in the amount of time a property sat empty between tenancies. According to the report, this dormant period increased from three weeks in January, to four weeks in February.

David Cox, chief executive at ARLA Propertymark, said:

“This month’s results continue to show a drop in the supply of rental properties and this is no surprise; the minimum energy efficiency standards come into effect in April meaning all rental properties must be EPC rated E or above.

“The dip in supply indicates that landlords are cutting it fine and taking their properties off the market to make the necessary changes before the deadline – but we could also see up to 300,000 properties taken off after the deadline passes on Sunday because they don’t reach the minimum requirements.

“This is also likely to push rent costs up as competition heats up among prospective tenants. We could have a supply crisis on our hands and for landlords who haven’t yet started to upgrade their properties, now is the time to act and fast.”

Swap rates may cause rate rise domino effect

Swap rates affecting buy to let mortgage rates nowOne of the leading specialist buy to let lenders has announced an increase to their buy to let mortgage rates, citing swap rates as the main influence on this decision.

Alan Cleary, managing director at Precise Mortgages, confirmed that increases of 0.20% will take effect on a range of residential and buy to let products, with further changes to seconds and bridging loan business possible in the future.

The news may not be limited to one lender, with much speculation over the past few months suggesting that high swap rates would have an effect on mortgage rates – and Cleary indicating that he too, expects to see other lenders follow Precise’s suit:

“Tonight we’re going to raise our fixed rate pricing by 20 basis points on a lot of our fixed rates because swap rate pricing is up.

“Generally specialist lenders have not passed on the swap cost and have been feeling the pain since January.”

“I’ve heard a number of other lenders are in the process of raising their rates.

“It’s inevitable – a business model that doesn’t pass on additional costs to its customers will not work.”

Mortgage Solutions reported in February that there had been a surge in swap rates, which affects the cost of mortgage funding for lenders, warning that this was likely to be introduced to mortgage costs.

At that time there had already been product repricing activity from Halifax, Nationwide, the Post Office and Tesco Bank - and it appears that Precise’s move may be the first of a number of lender announcements over the coming weeks.

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

“Increased swap rates showed early signs of their influence on buy to let mortgages in February, when one of the first lenders to react with a rate rise announced their decision, having cited swap rate pricing as the cause.

“Now that Precise, one of the UK’s largest specialist lenders, has also announced a rate hike – and highlighted they have been carrying the cost of the swap rate change since January – one can only imagine that others may follow.

“What does this mean for buy to let investors? I would urge any landlord thinking about investing, either for purchase or remortgage, to act sooner rather than later in making an application.

“With the uncertainty of Brexit looming and rumours of a Base Rate rise in May, many landlords have taken the opportunity to secure attractive low rates, but the deals currently on offer may be about to change.

“Do not sacrifice your decision making process with poor information though, speak to a specialist who can undertake a thorough search of available deals from across the marketplace with your needs and circumstances in mind.

“Commercial Trust does this every day and can act quickly to make an application on behalf of our clients.”

Rate roundup

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
1.39% 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

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.