Search Results For: buy to rent sector

BoE Changes to Buy-to-Let Making it Harder to get a Mortgage

Published On: March 21, 2018 at 9:52 am

Six months after the Bank of England’s (BoE’s) latest attempt to cool the buy-to-let market, almost two thirds of landlords (63%) who are aware of the changes say it is now harder for them to get a mortgage.

The changes, which were introduced by the BoE’s Prudential Regulation Authority (PRA), were brought in in two stages last year. We have a complete guide to help you understand the changes: https://landlordnews.co.uk/landlords-guide-pra-portfolio-underwriting-changes/

The first stage, in January 2017, required lenders to apply an interest cover ratio (ICR) of 5.5% to all products with terms of less than five years. More stringent stress tests were also introduced for all buy-to-let mortgages, with monthly rental income typically needing to cover 125% of mortgage repayments.

The second stage, in September 2017, requires portfolio landlords – defined as those with four or more buy-to-let mortgages – to undergo specialist underwriting processes when seeking new buy-to-let mortgages. This includes additional affordability tests with providing supporting documentation, such as business plans. It also means that underwriters must look at the landlord’s entire portfolio when considering new applications, not just the property in question.

According to the latest research by the National Landlords Association (NLA), 63% of landlords that are aware of the changes believe that they make obtaining new buy-to-let mortgages harder. This rises to 70% for portfolio landlords.

Similarly, almost half (48%) of landlords that are aware of the changes believe that they have slowed down the finance process, while 46% believe that they reduce the range of mortgage products available to them.

Richard Lambert, the CEO of the NLA, says: “These findings show that the PRA’s changes seem to be greatly affecting the ability of landlords to find new finance and increase their portfolios. Given that the private rented sector now makes up 20% of the housing market, it is vital that professional landlords are incentivised to continue providing good quality, affordable housing to those who need it. This appears to be achieving quite the reverse.

“Landlords looking to add new properties to their portfolios need to be conscious of the new requirements. We suggest talking to your mortgage broker or bank before committing to any new property.”

Scottish Rental Market Continues Struggle Due to Tax Changes

Published On: March 20, 2018 at 12:14 pm

Author: Em Morley

Categories: Lettings News

Tax changes continue to cause pressure on the Scottish rental market, causing buy-to-let landlords to cut down on properties in their portfolio, or even leave the private rented sector entirely. This is even likely to increase in the coming months.

The letting agent Aberdein Considine has released a report warning that these government tax changes and the removal of tax relief on mortgage payments for landlords have had an adverse effect on the Scottish rental market.

Their report goes on to claim that the amount of buy-to-let landlords has already dropped due to these changes. According to their quarterly Property Monitor report, this has led to a drop in the demand for homes to buy in certain areas of Scotland.

We are looking at a fall of property sales in 17 of Scotland’s 32 local authority areas during the final quarter of 2017.

The introduction of a 3% Additional Dwelling Supplement (ADS) in April 2016 for those looking to invest who already own property, and the Land and Building Transaction Tax (LBTT) are proving to be the major changes causing this financial strain. On top of this, the phasing out of mortgage interest relief is taking its toll.

The buy-to-let mortgages themselves are not as easy to secure these days, due to the increasingly strict underwriting rules set for portfolio landlords.

Jacqueline Law, managing partner at Aberdein Considine, has said: “What started as a trickle of landlords leaving the sector in 2017 has now become a steady flow.”

The letting agent is predicting a sharp decline in available properties to rent appearing on the market in the near future, largely due to landlords making the decision to reduce their portfolios. If the market does indeed go this way, then the pressure will grow on the private rented sector, with a possible consequence of rising rent prices.

Law also commented: “There has been a significant change in the Scottish property market in the last six months and it is gathering pace.

“By targeting landlords, politicians north and south of the border are squeezing one of the biggest and most powerful buying forces out of the Scottish property market, which is already affecting sales in certain areas.”

This pace will have to slow soon, otherwise we run the risk of a market flooded with overpriced rental properties, yet not much choice.

Rental Tax Hikes Harming Levels of Housebuilding

Published On: March 20, 2018 at 9:07 am

Author: Em Morley

Categories: Property News

UK House Price Growth Continues to Falter

A major house-builder has blamed, in part, the recent tax increases on private landlords as a reason for not increasing the number of houses it has been building.

The importance of landlords and other property investors in the buy-to-let market, according to the Berkeley Group, is that they “buy early in the cycle and provide security of cash flow to enable complex, capital intensive developments to be brought forward.”

Without the demand for new houses for domestic and residential buy-to-let landlords, Berkeley Group says it’d be impossible to boost housing supply beyond its current plans.

Landlords put off investing in property since the increase in taxes

In many ways, it’s unsurprising that the buy-to-let industry has been subdued recently, as investors are moving with caution since the April 2016 introduction of the 3% Stamp Duty levy. Combined with the reduction on mortgage interest tax relief, and tougher criteria from lenders, landlords and property investors seem to have been put off investing in new properties.

This is supported by the Residential Landlord Association’s (RLA) research exchange, PEARL, which has found that 69% of landlords have been put off investing in new properties due to the Stamp Duty levy. Of the 3,300 participants in this study, this means that 2,277 have been put off investing in new property – which could logically mean that there might be 2,277 less rental homes available to those who need it.

David Smith, Policy Director for the RLA, said:

“We have long warned the Government of the dangers of its tax raid on the private rented sector. Now we see its impact, with investment in new homes slowing and house builders not confident to up their levels of house building.

“Rather than taxing new homes, it is time for smarter, pro-growth taxation that recognises the rental market as a crucial part of addressing the housing crisis.”

Why have the tax increases been put in place?

The government is wanting to push homeownership, and one way of doing this is to slow the buy-to-let market, in theory leaving more properties available for first-time buyers to get on the property ladder. However, this is arguably not the effect it’s been having – landlords have been put off investing, and people who might one day be able to afford their own home still need places to live in the meantime.

Getting prospective homeowners out of the rental market and onto the property ladder might require more foresight than just increasing charges to UK landlords (most of whom are individuals, as opposed to corporations, meaning slight increases can have large impacts), such as a provision of tax relief. An increase in property investments to let, as well as schemes to encourage landlords to sell to tenants.

Check out this article which discusses possible ways that the UK housing market could be improved, in addition to new-build housing developments.

For more detailed information on the 3% Stamp Duty charge, check out this guide.

Three-Quarters of First Time Buyer Mortgage Applications Complete

Published On: March 5, 2018 at 9:14 am

Author: Em Morley

Categories: Finance News

Almost three-quarters (74%) of first time buyer mortgage applications via intermediaries resulted in a completion during the fourth quarter (Q4) of 2017, according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA).

This compares with just over half (53%) a year earlier, as first time buyers benefitted more than any other customer group from improving access to mortgage finance during 2017.

The quarterly IMLA report, which uses data from BDRC, examines consumers’ success rate in securing a mortgage via the intermediary channel, by tracking their progress from initial expression of interest (seeking a decision in principle) through to completion. In doing so, it compares the fortunes of intermediaries dealing with first time buyers, home movers, remortgagers, buy-to-let borrowers and applicants for specialist loans.

Three-Quarters of First Time Buyer Mortgage Applications Complete

Recent UK Finance data shows that first time buyer numbers reached a ten-year high in 2017. IMLA’s report suggests that this was helped by almost nine in ten (88%) applicants securing a mortgage offer in Q4 2017 for the third successive quarter, up from 73% a year earlier. More than four in five (84%) of those offers in Q4 went on to complete, compared to 72% 12 months before.

Across 2017 as a whole, 87% of first time buyer applications resulted in an offer and 81% of those went on to complete – both noticeable improvements on 2016. Overall, it meant that 71% of first time buyer applicants achieved their aim of securing a mortgage in 2017, compared with just half (50%) in 2016.

Encouragingly, the picture for first time buyers has improved without a noticeable change to the burden of mortgage repayments they are taking on. In December 2016, UK Finance data shows that average first time buyer mortgage repayments were equivalent to 17.4% of income. This remained largely stable throughout 2017 and actually fell to 17.1% of income in December 2017. The average loan-to-value (LTV) also reduced slightly, from 82.0% in December 2016 to 81.4% at the end of 2017, as first time buyers’ average borrowing remained stable as a proportion of the overall price paid for their homes.

Instead, improving product availability, persistently low interest rates and strong competition between lenders – along with cooling house price growth – have all helped first time buyers’ cause, along with the continuation of the Help to Buy equity loan scheme. IMLA’s data suggests that first time buyers’ fortunes have improved more than any category of borrower in the last year.

For every 100 applications, an additional 21 first time buyers completed on a mortgage in Q4 2017 compared with Q4 2016 (74 versus 53). The next biggest improvement in terms of access to mortgage finance was among specialist borrowers, with the completion rate rising by 12, from 61 per 100 to 73 in the final quarter of 2017.

Home movers saw the greatest quarterly improvement at the end of 2017, and were the only group to enjoy a greater success rate, with mortgage completions in Q4 (77 per 100 applications) higher than in Q3 (74).

Despite wider uncertainty in the UK’s economic outlook, the improving performance of the mortgage market last year meant that intermediaries have approached the New Year with confidence about their prospects for 2018.

Overall, 95% in Q4 2017 were confident about the outlook for the mortgage industry (unchanged year-on-year), while 56% were very confident about the outlook for the intermediary sector in particular – up from 52% a year earlier.

In terms of their own business’ activity, almost two thirds (64%) were very confident about the outlook in Q4 2017, up from 61% at the end of 2016.

Kate Davies, the Executive Director of the IMLA, says: “The mortgage market has proved itself to be resilient over the last year, and intermediaries have continued to play a vital role in joining the dots between lender supply and consumer demand. In particular, first time buyers have benefitted from widely available and competitively priced deals, even before the extra confidence boost of the Stamp Duty exemption announced in the Autumn Budget.

“It is encouraging to see that mortgage repayments have remained stable even as more first time buyers make the step up onto the housing ladder. With the Bank of England base rate on a slow upward trajectory, lenders remain firmly focused on rigorous affordability tests, so that borrowers do not overstretch themselves to achieve their ambitions.”

She continues: “At the same time, we need to be mindful that, as the latest English Housing Survey shows, more first time buyers are opting for loans of 30 years or more. This represents a shift in the dynamics of owning a home compared with previous generations: a fact emphasised by recent warnings from the Institute for Fiscal Studies about the decline of homeownership among younger adults.

“Mortgage lenders can play their part in supporting access for first time buyers, and our figures show they are clearly doing so. Our improving success in satisfying the finance needs of first time buyers throws the spotlight onto policymakers to ensure that pressures on the availability and affordability of housing in the UK do not put young households off applying in the first place.”

Supply of London Rental Properties at Critical Point

Published On: March 1, 2018 at 9:43 am

Author: Em Morley

Categories: Lettings News

The supply of London rental properties on the lettings market has dropped to a critical point, according to the latest report from ARLA Propertymark (the Association of Residential Letting Agents).

The number of properties available to let in London stood at 46% below the national average in January, the study shows.

As landlords are increasingly priced out of investing and running their lettings businesses in the capital, tenants are finding themselves up against stiff competition for London rental properties.

In January, letting agents in the capital typically managed 99 properties per branch, compared to a national average of 184. It was also the lowest region for property supply in December, but stood at 130 during the month, compared to a national average of 200.

David Cox, the Chief Executive of ARLA Propertymark, comments on the new findings: “The rental market in London should be thriving – the capital is a hub for business and culture, and attracts a huge influx of new residents every year. But the prospect of being a landlord is becoming less tenable, as potential buy-to-let investors are deterred by increased taxes and ever more complicated legislation – and higher property prices in London are making it becoming more and more difficult for landlords to make ends meet.

“Government policies designed to help renters now seem to be having the opposite effect, as landlords are moving away from using professional agents. This puts tenants at risk of falling into the hands of rogue landlords, or novice ones who don’t have any experience in the sector.”

Cox is of course referring to the upcoming ban on letting agent fees, which will prohibit agents from charging upfront fees to tenants. As such, many agents will pass on higher costs to landlords, who may then decide to ditch their agents in favour of self-managing their properties.

The latest ARLA Propertymark figures also indicate that Scottish tenants are experiencing rent hikes due to stricter tenancy rules.

We will continue to keep you up to date with all developments and changes throughout the UK private rental sector.

Number of First Time Buyers Reached Decade High in 2017

Published On: February 16, 2018 at 9:05 am

Author: Em Morley

Categories: Property News

The number of new first time buyers entering the market reached the highest level (365,000) since 2006 in 2017, according to the latest mortgage trends update from UK Finance.

However, mortgage lending to first time buyers, home movers and buy-to-let landlords dropped in December last year compared to the previous year.

There were 30,800 new first time buyer mortgages completed in December – 5.2% fewer than in the same month a year earlier. The £5.1 billion of new lending in the month was 1.9% down on an annual basis. The average first time buyer is now 30-years-old and has an income of £41,000.

2017 overall saw 365,000 first time buyers – the highest number since 2006. This is an annual increase of 7.4%, from 340,000 in 2016.

There were 30,700 new home mover mortgages completed in December – 4.7% fewer than in the same month of 2016. The £6.5 billion of new lending in the month was down by 3% year-on-year. The average home mover is 39-years-old and has an income of £55,000.

There were 30,500 new homeowner remortgages in the month of December – 7.4% more than in the same month of the previous year. The £5.2 billion of remortgaging was 8.3% more on an annual basis.

Number of First Time Buyers Reached Decade High in 2017

In the buy-to-let sector, there were 5,300 new property purchase mortgages completed in December – down by 17.2% on the same month a year earlier. By value, this was £0.8 billion of lending – 11.1% down year-on-year.

9,900 new buy-to-let remortgages were completed in December – 11.6% fewer than in the same month of the previous year. By value, this was £1.6 billion of lending – down by 11.1% on an annual basis.

Paul Smee, the Head of Mortgages at UK Finance, comments: “2017 saw the number of first time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder.

“But, although the market remains competitive, there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year.”

He adds: “We are also seeing a less buoyant buy-to-let market, which continues to be impacted by recent tax and regulatory changes. This will continue to flatten gross lending volumes this year.”

Shaun Church, the Director of mortgage broker Private Finance, also responds to the figures: “First time buyer numbers hit an 11-year high in 2017, thanks to a combination of affordable mortgage rates and a sustained effort from Government to help new buyers. Lenders keen to get a slice of the first time buyer action have been consciously improving their product range to target this group, with features such as allowing multiple borrowers to take out a loan becoming more commonplace. The recent change to Stamp Duty is likely to lead to heightened competition, with first time buyers set to benefit from an even greater product range as a result.

“The remortgage market also performed well last year, with existing homeowners motivated by rock bottom rates to lock into new deals. However, other areas of the market – such as the upper end of the housing market and the buy-to-let sector – continue to suffer from tax and regulatory changes, resulting in a flatter overall outlook for mortgage lending.”

He continues: “Affordability issues also stubbornly remain. Annual house price growth hovered around 5% in 2017 – an improvement from the significant annual gains seen in 2016, but sufficient to cause concern for some would-be buyers. Large regional variances also remain and, despite house prices slowing in some London boroughs, the affordability gap between the capital and the rest of the country remains vast. However, the industry remains hopeful that the Government’s promise of greater housebuilding and therefore improved affordability will start to be realised in 2018.”

The CEO of the National Association of Commercial Finance Brokers, Graham Toy, adds: “The highest number of first time buyers in more than a decade is excellent news, as it shows generation rent’s wait-and-see mentality is gradually becoming a thing of the past. Clearly, mortgages are available to those who are young enough, can command good salaries and want a place of their own.

“Elsewhere, the buy-to-let market is now showing more modest signs of growth, due to recent tax changes, as landlords’ appetite to add to their portfolio using finance is lower. We saw this in the 17.2% fewer new buy-to-let mortgages completed in December than in the same month a year earlier. While we have to take the seasonal slowdown into account, the signs point to all mortgage lending in 2018 being somewhat subdued.”

SaveSave