Search Results For: buy to rent sector

Leeds Building Society encourages longer tenancies

Published On: August 15, 2016 at 11:38 am

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Leeds Building Society has move to alter its mortgage criteria, in an attempt to encourage buy-to-let landlords to take on longer-term tenancies.

The lender has announced that it is to accept tenancy agreements for periods that suit both the landlord and the tenant, instead of stipulating a maximum timeframe. Previously, agreements were set at 12 months.

Long-term tenancies

A number of leading lenders have said that they will advocate longer-term tenancies, but many will only go to a maximum of three years. Leeds Building Society will be amongst a small group with no set length of agreement.

Richard Fearon, Chief Commercial Officer at Leeds, said, ‘this is a good example of our strategy of supporting borrowers who are not well served by the market. By demonstrating flexibility and not imposing a maximum tenancy period we are helping to support out buy-to-let borrowers.’[1]

Leeds Building Society encourages longer tenancies

Leeds Building Society encourages longer tenancies

A recent report from Shelter has revealed that 70% of tenants in the private rental sector would prefer a tenancy agreement of between three and five years. Many tenants have voiced their concern over insecurities with shorter-term arrangements.

David Hollingworth of L & C Mortgages observed, ‘more people are renting for longer but often find that they have little security of tenure, with tenancies often offered only as a six-to-twelve month option. Leeds’ removal of the maximum tenancy period will help increase choice for landlords and their tenants, both of whom may prefer a longer-term tenancy agreement to be in place.’[1]

[1] http://www.propertyreporter.co.uk/landlords/leeds-bs-announces-landlord-focussed-criteria-changes.html

Landlords Most Discouraged from Investing by Mortgage Interest Tax Relief Changes

Published On: August 12, 2016 at 10:25 am

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Private landlords are most discouraged from investing further in the buy-to-let sector by forthcoming mortgage interest tax relief changes, according to a survey for SellingUp.com.

With a host of new and proposed laws and tax changes hitting landlords recently, many groups have spoken out against the Government, claiming that it is trying to discourage landlords from investing in property in order to raise revenue and stimulate first time buyers.

SellingUp.com identified the major policies involved in the Government’s clampdown on landlords and asked investors which, if any, were the most likely to put them off buying new properties.

The majority of landlords (65%) said that the forthcoming changes to mortgage interest tax relief will discourage them from investing, with the recent Stamp Duty surcharge coming in second, with 56% of landlords.

Behind is the removal of the 10% Wear and Tear Allowance, at 20%, followed by rent control plans, at 8%, and February’s Right to Rent legislation, at 5%.

However, please note that respondents were able to choose more than one answer.

SellingUp.com also found that the majority of landlords surveyed owned multiple properties, with 60% owning between two and nine properties, while 29% hold more than ten. The remaining 11% own just one property. These figures contrast to recent research, which suggests that most landlords manage their investments part-time and own just one rental property: /majority-landlords-part-timers-just-one-property/

The policies that the landlords were asked about were:

Mortgage interest tax relief

Section 24 of the Finance Act 2015 will phase out the tax relief on mortgage interest for landlords to the basic rate of tax. The law is due to come into force from April 2017. The Government has provided a guide for landlords on how the change will affect them: /government-guide-tax-relief-changes-residential-landlords/

Stamp Duty surcharge

As of 1st April 2016, those buying an additional property, either a buy-to-let investment or second home, are charged an extra 3% in Stamp Duty. We have a guide on how the tax hike is calculated: /landlords-guide-3-stamp-duty-surcharge/

Wear and Tear Allowance 

The automatic 10% Wear and Tear Allowance for landlords was abolished in April 2016. Now, landlords can only claim for actual expenditure.

Right to Rent 

As of February 2016, landlords are legally obliged to conduct immigration status checks on all prospective tenants. If they do not comply with the law, they could face fines of up to £3,000.

Rent controls 

During the London mayoral election race, Sadiq Khan pledged to fight for rent controls in the capital. However, since he has been elected, he seems to have gone quiet on the topic. Recently, the Residential Landlords Association (RLA) claimed that rent caps would spell disaster for tenants: /rent-controls-spell-disaster-tenants/

Landlords, which new/recent policy is likely to discourage you from investing further in the sector?

Mortgage Arrears Drop to Lowest Level on Record

Published On: August 12, 2016 at 8:36 am

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The amount of mortgage arrears has dropped to the lowest level on record, according to the Council of Mortgage Lenders (CML).

Mortgage Arrears Drop to Lowest Level on Record

Mortgage Arrears Drop to Lowest Level on Record

The total number of mortgages in arrears as of June 2016 was 92,600 – down by 13.4% on last year, when it stood at 106,800.

Homeowners with residential mortgages saw arrears of at least 2.5% fall to 87,900 in June, while buy-to-let mortgage arrears dropped to 4,700.

There was also a decline in the number of owner-occupied and buy-to-let property repossessions – from 1,500 to 1,300 for homeowners and from 700 to 500 for landlords.

The CML reports that the number of mortgaged property repossessions is on course to be the lowest since 1982 this year.

The findings arrive as Ministry of Justice data shows that there were 42,729 rental evictions – for both the social and private sectors – in England and Wales in 2015, compared to 5,592 mortgaged property repossessions, despite the fact that rental housing accounts for just one-third of the total housing stock.

The CML believes that lenders try to avoid repossession wherever possible to help owner-occupiers recover from a temporary period of financial difficulty, but landlords may move more quickly to protect their investment properties.

The Director General of the CML, Paul Smee, comments: “Another welcome reduction in arrears and possessions shows that borrowers are continuing to prioritise their mortgage commitments and that lenders remain committed to helping them through a period of temporary difficulty, wherever possible.

“As ever, the key to success in dealing with any payment problems is to address them as soon as possible. Any borrowers anticipating difficulty in paying their mortgage should therefore speak to their lender at the earliest opportunity.”

Buy-to-let landlords must be aware that their finances may be affected by forthcoming changes to mortgage interest tax relief. From April 2017, the amount of tax relief that landlords can claim against mortgage interest will be cut to the basic rate.

Use the Government’s guide to help you prepare for the changes: /government-guide-tax-relief-changes-residential-landlords/

Majority of Landlords are Part-Timers with Just One Property

Published On: August 10, 2016 at 9:59 am

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The majority of private landlords in England only run their lettings businesses part-time and own just one rental property, according to new research.

The survey, by the Council of Mortgage Lenders (CML) along with specialist lender BDRC and the London School of Economics, updates the findings from a similar study in 2010.

Majority of Landlords are Part-Timers with Just One Property

Majority of Landlords are Part-Timers with Just One Property

Six years later, the survey reveals there is almost no change in the number of landlords whose main occupation is not managing their property portfolios.

Back in 2010, 92% of landlords were part-timers, rising to 95% today.

Similarly, the proportion of landlords operating as individuals, rather than limited companies, is virtually unchanged. Six years ago, 89% of landlords managed their portfolio as an individual or couple, dropping slightly to 87% now.

This decrease may be a result of new tax relief changes that are due to be introduced in April 2017. From this date, the amount of tax relief that landlords can offset against mortgage interest payments will be cut to the basic rate.

However, limited companies will be exempt from the changes, which has prompted a move to this type of business structure. Find out more about the mortgage interest tax relief changes here: /mortgage-interest-tax-relief-changes/

Additionally, the survey highlights a move towards larger property portfolios.

Although the majority of landlords still own just one property, the proportion has dropped significantly since 2010, from 78% to 63%.

At the same time, the amount of landlords managing two to four properties has grown from 17% to 30%.

However, most landlords (90%) earn less than half of their income from their rental properties, which is almost unchanged since 2010. Does this suggest that the buy-to-let sector is becoming less lucrative?

With many recent legal changes affecting landlords, such as the new Stamp Duty surcharge, landlords must consider whether investment in the private rental sector is a viable option.

However, the CML does point out that the 2016 survey was only conducted in England, while the 2010 study covered the whole of the UK.

Government Should Scrap Stamp Duty, Insist Conveyancers

Published On: August 8, 2016 at 8:36 am

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The Government should scrap Stamp Duty Land Tax to create a more “buoyant and vibrant” property market, insists the Society of Licensed Conveyancers (SLC).

Government Should Scrap Stamp Duty, Insist Conveyancers

Government Should Scrap Stamp Duty, Insist Conveyancers

Since the 3% Stamp Duty surcharge for buy-to-let properties and second homes was introduced on 1st April, the number of landlords purchasing properties has dropped significantly.

Additionally, with the amount of tax relief that landlords can claim on their mortgage interest payments falling to the basic rate from April 2017, there is widespread concern in the industry that many more landlords will be deterred from investing in the buy-to-let sector, which would reduce the stock of much-needed rental homes.

The SLC believes that scrapping Stamp Duty would not only create a more stable and lively property market, but would also lead to a “marked hike in investment and building of new homes” along with creating a “much more straightforward and quicker home buying and selling process”.

The Chairman of the SLC, Simon Law, says: “Stamp Duty Land Tax is perhaps the most inaccurately named tax in existence. There is no stamp involved, it is not a duty, and it is on assessed property values rather than land. In fact, the only word that is in any way accurate is tax. In reality, SDLT is a direct property transaction tax.

“It is ironic that the Government is engaged in a review to improve the home buying process, when it has introduced legislation that actually makes the process more complicated and tortuous. It is an insult on top of this that HMRC looks to conveyancing lawyers to act as tax collectors.”

Just two weeks ago, the TaxPayers’ Alliance also urged the Government to slash Stamp Duty rates by 50% immediately, with a view to abolishing the charge altogether.

The think tank warns that tenants will end up bearing the brunt of the latest tax hikes for landlords, as the additional tax will result in a reduction of homes on the rental market, which will in turn push rents up.

When the reduction in mortgage interest tax relief comes in from next year, many landlords will be left with no alternative but to pass extra costs onto their tenants. The TaxPayers’ Alliance believes that the Government still has a chance to undertake real reform to tackle the housing shortage in the UK and stop rents from soaring, by either revising or abolishing Stamp Duty and tax relief changes.

The full story can be found here: /think-tank-calls-stamp-duty-scrapped/

Is There a Solution to the Housing Crisis?

Published On: August 6, 2016 at 8:36 am

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It’s well known that homeownership is in decline. In fact, it’s at the lowest level for three decades. But is there a solution to the housing crisis?

Claire Carponen, of the HomeOwners Alliance, has taken a look at the main problems and possible solutions to the UK’s housing crisis.

The average wage in the UK is £26,500, while the average house price is over £200,000. It doesn’t take a mathematician to work out that the odds of buying a house for a first time buyer are pretty slim.

Is There a Solution to the Housing Crisis?

Is There a Solution to the Housing Crisis?

Carponen claims that the gap between wages and house prices is one of the main barriers to homeownership.

According to a report from the Resolution Foundation, homeownership has dropped to its lowest level for three decades. After hitting a peak of 71% in 2003, the number of households that own their home has now dropped to just 64%.

But don’t be fooled into thinking this is a new trend. Four years ago, the HomeOwners Alliance published a report named The Death of Dream: The Crisis in Homeownership in the UK, which found that homeownership has been in decline for years.

Although the recession did accelerate the rate of decline, it is not a short-term blip caused by financial difficulty, but rather a long-term trend.

Carponen reports that affordability remains an issue in the south of England, but is now spreading to other parts of the country. The Resolution Foundation’s report warned that while the news focuses on the housing crisis in London, those living in Manchester are actually facing greater difficulty in getting onto the property ladder.

While the south has typically had higher house prices, the north is catching up, with both Manchester and Yorkshire experiencing steep drops in homeownership.

The CEO of the HomeOwners Alliance, Paula Higgins, recently said in an article in The Telegraph: “The decline of homeownership and the lack of affordable housing is having – and will increasingly have – profound, long-lasting and adverse economic and social consequences.”

Although housing has become so unaffordable, Carponen has found that most people still aspire to own their own homes.

Being a homeowner is much more than just owning a pile of bricks and mortar, she insists. Those that own their own home are more likely to have a better quality property, a sense of stability and permanence, and a financial safety net for old age.

And while the Government is trying to help with its first time buyer initiatives, its schemes aren’t reaching enough people, believes Carponen. Although it proudly announced in March that its Help to Buy scheme has helped 180,000 first time buyers get on the property ladder, this was over a three-year period.

The fact that not enough homes are being built has been well documented. But Carponen warns that more homes may not necessarily solve the housing crisis. In central London, thousands of new homes are currently under construction or in the pipeline, yet most will be unaffordable for the majority of people who are living and working in the capital.

Higgins insisted: “We must make sure that the homes being built are of the right quality and meet the needs of the ultimate owners – last time buyers as well as first time buyers – and not the housebuilder.”

While many young people are struggling to get a foot on the property ladder, landlords must remember to provide safe, suitable and secure homes for those forced to live in the private rental sector.