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Em Morley

One in three landlords could be forced to sell after failing affordability test to remortgage

Published On: March 3, 2023 at 10:21 am

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Categories: Landlord News

One in three landlords could be forced to sell after failing affordability test to remortgage

A buy-to-let mortgage broker is warning landlords that as many as one in three property investors is struggling to remortgage after failing their lender’s affordability test.

According to research undertaken by buy-to-let specialist Mortgages for Business, carried out on behalf of the Daily Mail, some buy-to-let investors are being forced to accept variable rates as high as 9.5% as a result of failing affordability tests for remortgages. Others are selling up because they can no longer afford their loans.

Gavin Richardson, managing director of Mortgages for Business, comments: “It’s a critical situation for small landlords at the moment. They are worried about Section 21 reform and EPC regulations and tax. On top of that, they’re having to worry about higher mortgage rates.

“They’re right to be worried. We’re seeing landlords coming off rates of 3.5% and being unable to remortgage because, according to the lender’s stress test, their loan is no longer affordable. Unable to secure a new deal and with nowhere else to go their loans are reverting to the lenders standard variable rate, which average about 7.5%. In fact, in the worst case scenario, they are moving to their lender’s standard variable rate at rates as high as 9.5%. Their only other options are to pay a socking-great fee to secure a more reasonable interest rate, which can cost them tens of thousands of pounds. Or they can sell up and go home.”

A landlord charging £1,200 a month rent with a mortgage of £225,000 coming off a fixed rate of 3.99% would now be offered a remortgage of £180,893, based on a rate of 5.49%, falling £44,000 short of the loan amount they need to remortgage. At a rate of 5.99%, the shortfall rises even higher to £59,207; at 6.29% it is £67,114. To be accepted for a remortgage of £225,000, the landlord would have to increase the rent they charge by nearly £300 to £1,495.

Mortgages for Business says some lenders offer landlord borrowers product transfers, a new deal without asking them to pass a new stress test. Others will allow borrowers to remortgage back to them at reduced fees, while a few are actively looking at ways to help.


Landlords welcome landmark court ruling on rent-to-rent companies

Published On: March 1, 2023 at 10:09 am

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Categories: Landlord News,Lettings News,Tenant News

Landlords welcome landmark court ruling on rent-to-rent companies

Landlords have welcomed a landmark ruling from the Supreme Court that provides vital clarification about the responsibilities of so called ‘rent-to-rent’ companies. 

The ruling in the case of Rakusen v Jepsen will have important implications for the private rented sector as a whole, says the National Residential Landlords Association (NRLA).

In the case, the landlord, Mr Rakusen, agreed to let a flat to a rent-to-rent company. The property required a licence, but the company did not apply for one.

As a result of the failure to be licenced, the former tenants of the flat sought a Rent Repayment Order against Mr Rakusen rather than the rent-to-rent company – even though he had not received rent directly from the tenants. 

Rent-to-rent companies take over the running of a property for a landlord.

At an initial tribunal it was ruled that the Rent Repayment Order could be applied for against Mr Rakusen. The Court of Appeal however later overturned the decision and ruled in Mr Rakusen’s favour.

Today, the Supreme Court has ruled that where rent-to-rent companies take over the running of a property, they cannot shirk responsibility and expect to leave the landlord to pay for their legal failings. 

Ben Beadle, Chief Executive of the NRLA, which intervened in the case in support of responsible landlords, comments: “This case has never been about whether legal obligations should be met, but about who should be responsible for them in rent-to-rent cases.

“We therefore welcome today’s ruling which accepted many of the arguments made by the NRLA and provides important clarity for landlords and tenants alike.

“The ruling makes clear that it is the responsibility of rent-to-rent companies acting as a landlord to ensure that relevant legal requirements are met, since it is they who receive tenants’ rent. It is simply not right that such companies can take money from people without any responsibility for the property they are running.”

Pests are most common maintenance task for landlords

Published On: February 28, 2023 at 7:25 pm

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Categories: Landlord News,Lettings News

North East tops the list of most affordable regions to rent

Plagues of pests are the most common maintenance task facing landlords, while roofing repairs will cost them the most on their investment, new research shows.

The latest research by lettings and estate agent Benham and Reeves has shown that, on average, a landlord will be required to carry out repair or maintenance work on a buy-to-let property 72 times during their ownership, costing them over £34,000. 

Benham and Reeves analysed the most common repair and maintenance tasks associated with a buy-to-let property, how often they occur during the ownership of a property and the total cost of completing these tasks over their period of ownership.

The research shows that the average landlord will own a buy-to-let property for an average of 109.2 months, or just over nine years. 

During this time, the 12 most common maintenance issues alone will see them carry out an average of 72 repairs on the property, costing them £34,314 in the process. 

The most costly of the lot is repairs made to the roof and while it is only likely to be required six times during the span of their ownership, the total cost of these repairs comes in at £3,494. 

While a landlord is likely to replace or repair white goods just five times during the time they own a buy-to-let property – the lowest frequency of all repair tasks analysed – they rank as the second largest overall maintenance cost at £3,231.

Keeping the property in a fresh lick of paint may also be required just five times during ownership, but also ranks as the third largest total cost associated with maintaining a buy-to-let at £2,992 on average.  

However, when it comes to the most persistent problems facing the nation’s landlords, its household pests that rank top.

Benham and Reeves estimates that during the average time of buy-to-let ownership, a landlord will have to address the issue of pest control as many as eight times – costing them a total of £2,940 in the process – the fourth highest total cost. 

Mould or damp is also one the biggest banes of the life of a landlord and while it ranks as one of the less expensive repairs to make at £2,752 in total, the average landlord will need to carry out mould maintenance an average of seven times during their ownership of the property.

Marc von Grundherr, Director of Benham and Reeves, comments: “The long-term cost of being a landlord cannot be ignored. Anyone who is thinking of investing in buy-to-let property needs to first be aware of how ongoing outgoings will affect the overall profitability of their investment. 

“However, ensuring that you’re always on top of maintenance issues is much more affordable than letting them get out of control, not least because a high quality property reduces tenant turnover and, therefore, void periods.

“Over the course of the ownership lifespan, these costs do little to damage the great returns of property investment, but would-be landlords do need to make sure they have enough cash flow available to cover maintenance jobs as and when they arise, while safe in the knowledge that, over time, those costs will be recouped.

“The good news is that while some maintenance costs, such as roofing repairs, are amongst the most expensive, they are also the least frequent.”

HMO stock levels continue to fall, now down -2.4%

Published On: February 28, 2023 at 5:57 pm

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Categories: Landlord News,Lettings News,Property News

HMO stock levels continue to fall, now down -2.4%

Market analysis by debt advisory specialists Sirius Property Finance reveals which areas of England are home to the greatest abundance of HMO stock as well as those with the most significant decline.

The analysis shows that there are an estimated 489,701 HMO properties, accounting for 2% of the nation’s entire dwelling stock.

London is home to the largest number of HMOs with 145,615 properties accounting for 4% of the capital’s homes, while the South East’s 69,102 HMOs make up 1.7% of the regional total.

The region with the fewest HMOs is the North East where 17,378 properties account for 1.4% of the region’s dwellings, but the region where HMOs account for the smallest percentage of local homes is East Midlands where 21,752 properties account for just 1% of the whole housing market.

Annual HMO stock changes

Across the nation as a whole, the number of HMOs has fallen by -2.4% in the past year, but this drop is dwarfed by regional declines.

The East Midlands has recorded an annual HMO stock decline of -26.1%, the North East has seen HMO stock levels drop by a -15.8% drop, while in the South East numbers are down -6.7%.

Declines, however, are not universal across all regions. The likes of the West Midlands (16.9%) and Yorkshire & Humber (11.2%) have recorded annual stock growth over the past year.

Kimberley Gates, Head of Corporate Partnerships at Sirius Property Finance, comments: “Any legislative change designed to improve tenant welfare is a positive one on the face of it, but much like the regular buy-to-let sector, a perhaps overly heavy handed approach by the Government has led to a decline in the number of HMOs available across the nation. 

“The implications of this decline to tenants are inevitably a higher cost when renting, due to the growing imbalance between HMO supply and demand. 

“However, as the HMO sector continues to find its feet in the wake of these legislative changes, it presents a great opportunity for investors entering the space who can hit the ground running and capitalise on high tenant demand levels. Providing they have their house in order in terms of licensing and living standards, of course.”

The commuter belt rental markets where tenants can reduce their rent by as much as half

Published On: February 27, 2023 at 11:24 am

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Categories: Lettings News,Tenant News

The commuter belt rental markets where tenants can reduce their rent by as much as half

Research from estate and lettings agent Barrows and Forrester has revealed where tenants across six major cities could cut their monthly cost of renting by as much as half by looking to surrounding towns across the commuter belt.

Barrows and Forrester analysed the current cost of renting across six major cities in England and how this cost compares to a number of towns within commuting distance.

The research shows that Newcastle is home to the largest cost saving for tenants willing to commute. The average cost of renting in towns surrounding the city currently sits at £571 per month, £296 less than the average Newcastle rent of £867.

That’s a 34% monthly rental reduction, saving renters an average of £10 for every minute they spend commuting.

Darlington ranks top, with renters able to reduce their monthly rental outgoings by £342 per month (-39%), followed by Durham with a £328 monthly saving (-38%).

With the average cost of renting in London the highest of all major cities at £1,672, the capital’s commuter belt presents the next largest saving for tenants. The cost of renting within a town in reaching distance of the capital currently averages £1,137, 32% more affordable saving tenants £17 per minute while commuting an average of 32 minutes.

With the current average rent in Luton coming in at £842, London’s tenants could halve their monthly rental bill by 50% while saving £36 per month for every one of the 23 minutes it takes to travel between the two.

Ashford also presents a significant rental saving at £939 per month, 44% less than the average London rent.

Looking to the commuter belt around Leeds could see you cut your rental costs by -21%, with Halifax presenting the largest saving at £567 – 37% more affordable than renting in the city.

A commuter belt rental could save you £124 per month compared to renting in Manchester and £97 per month versus renting in Birmingham.

However, Barrows and Forrester says renters in Liverpool may be better off staying put. The average cost of renting across commuter towns surrounding the city is just 3% more affordable than the current Liverpool rent of £657 per month, equating to an average saving of just £1 per month for every one of the 28 minutes spent commuting.

James Forrester, Managing Director of Barrows and Forrester, comments: “Despite a pandemic induced fall in demand for city centre rentals during the early stages of Covid, the cost of renting across the nation’s major cities remains substantial and has continued to climb as normality has returned. 

“This won’t help prospective and existing tenants who are already being squeezed by the cost of living crisis and broadening their search to the commuter belt could well save them a considerable amount when it comes to the monthly cost of renting.

“Of course, when doing so you also need to weigh up the wider quality of life an area can offer, along with the cost of commuting. You may find that renting further afield can make a real difference to your disposable income, but it might not be worthwhile if the majority of this goes on train tickets, or you simply don’t want to spend the additional time travelling.”

UK landlords enjoy rising yields as rent values outperform house prices

Published On: February 27, 2023 at 11:05 am

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Categories: Landlord News,Lettings News

Treasury loses £1.5 billion since hike in rented housing tax

UK rental yields have increased by as much as 2.5% in the past year as rent values outperform house prices, market analysis by debt advisory specialists Sirius Property Finance reveals.

It says that despite the Government’s best efforts, specifically the abandoned plan to increase capital gains tax for landlords, the UK rental market has continued to strengthen over the past year. Landlords who stood strong in the face of potential tax hikes have now been rewarded with solid growth in yields.

The current average UK rental yield is 4.08%. This marks a 0.19% increase over the past year. But to better understand exactly how well the national market is performing, Sirius has analysed yield data on a postcode level and found that some regional numbers dwarf this UK average. 

Today, the UK’s highest rental yields are being generated in the BD1 postcode region of Bradford where they currently stand at a very healthy average of 11.06%.

In the Leeds postcode district of LS2, yields currently average 10.05%, while in Manchester’s M14, they stand at 9.41%.

This northern dominance continues with Leeds’ LS4 district (9.18%) before the midlands starts to enter the picture with Nottingham’s NG7 (8.96%) and Birmingham’s B29 (8.57%). 

Wales then makes an appearance with Rhondda Cynon Taff’s CF37 (8.54%) and Swansea’s SA1 (8.52%), before we head back to the north with TS3 in Middlesbrough (8.48%) and SR1 in Sunderland (8.48%). 

Across all of but one of these examples, yields are being bolstered by the fact that rent prices have increased significantly more than house prices. In Bradford, for example, the average house price is up 11.1% while the average rent has grown by 22.8%.

Annual growth

In terms of largest annual yield growth, Exeter’s EX4 tops the list with an increase of 2.56% in the past year bringing the current average to 6.52%.

Just as it does for strongest current yields, Leeds’ LS2 ranks in second place with an increase of 2.33%, while Nottingham’s NG7 also makes another appearance after enjoying growth of 2.10%.

In the DD2 district of Dundee, yields have grown by 2.03% to bring the current average to 6.11%, while Manchester’s M11 annual growth of 1.98% brings the current average to 7.63%. 

Strong growth has also been achieved in Aberdeen’s AB24 (1.77%), Salford’s M7 (1.66%), York’s YO1 (1.60%), Hull’s HU1 (1.58%), and Wokingham’s RG10 (1.56%). 

As is the case with the list of highest yield locations, these areas of strong yield growth are being helped by house price performance being overshadowed by that of rent values, a prime example of which is Exeter where prices are up 12.8% in the past year while rent is up 85.6%.

Kimberley Gates, Head of Corporate Partnerships at Sirius Property Finance, comments: “Rent values have continued to climb over the past year and already high demand is set to get even higher as more and more potential buyers are put off crossing over into the sales market by recent economic instability and the rising cost of living. As such, while rents have shot up, house prices have seen marginal drops in recent months. 

“However, it’s important to acknowledge that while mortgage rate hikes and the cost of living crisis have indeed helped generate higher yields, landlords are also tackling increased costs just like everyone else. These higher portfolio running costs negate some of the yield increases we’re seeing and should be carefully considered when thinking about investing in new properties.”