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The Days of Rock Bottom Buy-to-Let Mortgage Rates “May be Numbered”

Published On: December 13, 2018 at 9:59 am

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The days of rock bottom buy-to-let mortgage rates “may be numbered”, according to Andrew Turner, the Chief Executive at broker Commercial Trust.

Buy-to-let landlords now have more choice than ever before when looking for a mortgage, as the number of products available on the market is at a record high.

Moneyfacts reported this year that there are more than 2,000 buy-to-let mortgage products on the market, as lenders step up their efforts to compete for a smaller pool of customers.

But, aside from offering a variety in their ranges, lenders have also been competing to secure new borrowers by cutting their rates.

Turner says: “The past couple of years have seen lender competition rise in the buy-to-let market. This has helped to drive buy-to-let mortgage interest rates down, and led to an influx of products with cashback incentives, free valuations, free legal services and a variety of competitive fees.”

However, while incentives and rates in isolation may seem appealing, they do not provide the full picture.

Turner advises borrowers to take every aspect of the deal, including criteria, into account when assessing the suitability and total cost of a mortgage.

The Days of Rock Bottom Buy-to-Let Mortgage Rates “May be Numbered”

He also urges consumers to recognise that heightened competition has made the buy-to-let market more complex, which partly explains why there are now more than 2,000 products available for landlords.

But, while he expects to see “a continued trend of creative product options from lenders”, he thinks that mortgage providers may be about to call time on record low-cost loans for landlords.

“The days of rock bottom buy-to-let mortgage interest rates may be numbered,” he believes.

The past three years have seen buy-to-let mortgage rates drop and hover around historically low levels.

This has partly been due to the Bank of England (BoE) base rate, which rose in November 2017 for the first time in a decade, and currently remains at just 0.75%.

However, mortgage lenders are influenced by other factors when setting interest rates, and margins have been tight in recent months.

The number of incentives being added onto products perhaps underlines that interest rates cannot go any lower, but that lenders are still keen to attract landlord business.

Turner explains his thoughts: “I am expecting us to see buy-to-let mortgage rates rise in 2019.

“When the base rate increased again by 0.25% in August 2018, some lenders absorbed the extra costs and, in some cases, even reduced mortgage interest rates. I believe that this cannot continue indefinitely, so, if you are considering remortgaging, it may benefit you to secure a competitive deal now in case rates do go up.”

Judith Wilson Sentenced in Court over Failure to Comply with Notice

Published On: December 13, 2018 at 9:00 am

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Controversial buy-to-let landlord Judith Wilson was sentenced in court on Tuesday (11th December) for failing to comply with an enforcement notice issued by Ashford Borough Council, which ordered her to supply hot water to a disabled tenant.

Wilson has been fined £10,000 by Folkestone Magistrates’ Court and ordered to pay legal costs of £14,890.94.

After finding Judith Wilson guilty at a hearing in November, District Judge Justin Barron had ordered her to return to court for sentencing, and made a financial circumstances order under Section 162 of the Criminal Justice Act, which required her to disclose, in court documents, evidence of all bank accounts, both individual and joint, plus all assets.

In addition to the £10,000 fine, Judge Barron ordered Wilson to pay Ashford Borough Council’s legal costs in full. She has eight weeks to pay.

Welcoming the sentencing, a Spokesperson for Ashford Borough Council said that the case is a powerful reminder to private landlords that there will be serious consequences if they fail to deal fairly with their tenants.

They commented: “This successful prosecution shows that we have teeth and we are not afraid to fight for the rights of tenants. What a lot of private sector tenants don’t realise is that, if they have trouble with their landlord, they can come to us for help.

“Ashford Borough Council champions the rights of tenants, and we make sure that landlords remain accountable and live up to their responsibilities under the law. If they don’t, then there are consequences.”

They added: “In this case, we did everything we could to resolve the situation. We gave Mrs Wilson every opportunity to find a solution to the problem, but we were ignored. In the end, we realised that the only way to get justice for the tenants involved was to prosecute.”

As ever, we urge all landlords to stick to their legal responsibilities, and protect the health and safety of their tenants.

Landlords Eye the North for Investment as 2018 Comes to a Close

Published On: December 12, 2018 at 11:02 am

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Manchester's Mayor Andy Burnham to Address Future Renting North Conference

By Ian Boden, the Sales Director of LendInvest

Investors looking to add to their property portfolios could do far worse than focus on northern cities.

That’s one of the many conclusions that you can draw from the latest edition of the LendInvest Buy-to-Let Index.

It’s difficult to ignore just how well northern cities are delivering for property investors at the moment. Stockport has taken second spot in our index, on the back of impressive capital gains and rental growth, just ahead of Manchester in third place.

The fortunes of these two areas are very much intertwined – it’s precisely because Manchester is thriving to such a degree that growth is being driven in neighbouring postcodes, with Stockport just one example.

This is a pattern we are seeing elsewhere, too. Leeds, for example, is ranked 12th, with Harrogate just down the road also taking a spot inside the top 20. These areas offer investors impressive yields, while the ever-improving transport links between them make them ever more attractive to tenants.

The performance of these northern cities is not going unnoticed, either. A report from IP Global earlier this year pinpointed these northern powerhouse locations as representing some of the top targets for property investors from around the globe, ranking the likes of Manchester and Leeds alongside cities such as Bangkok, Lisbon and Berlin.

The rise of central England

Another region that has enjoyed an eye-catching performance has been central England. Birmingham has figured in the top ten for three consecutive indices now, and its appeal is well recognised by investors.

In this year’s Emerging Trends in Real Estate report from PwC and the Urban Land Institute, which looks at the cities that offer the best prospects for investors, Birmingham is the second highest ranked city in the UK, behind only Manchester.

Landlords Eye the North for Investment as 2018 Comes to a Close

As the report states: “Less dependent upon financial occupiers and foreign capital, these second-tier cities are now reckoned to offer interesting opportunities at better value than ‘over-priced’ London.”

It’s not just Birmingham that is delivering for investors, though when it comes to the Midlands. Wolverhampton has also broken into the top ten, taking seventh spot, just behind Coventry. Both cities have seen significant capital gains of 6.36% and 4.47% respectively.

Peterborough has caught the eye, too, taking eighth place, having performed strongly on yield, capital gains and rental price growth.

Don’t ignore the south

Nonetheless, it is a southern city that regains the top spot this quarter, with Colchester – a consistent presence in the top three – ranking highest. While the rate of capital gains has slowed in Colchester, it is the swift increase in rental price growth that has pushed it to the top, with landlords there seeing rents jump by 6.5%.

It’s worth noting how many other southern cities pop up towards the top end of the index, despite the improving fortunes of northern cities. In the top ten alone we see Canterbury (5th), Enfield (9th) and Luton (10th), alongside Colchester.

Indeed, some of the most impressive rental price increases have been seen in the south. In Enfield, for example, rents have jumped by 4.25%, while Cambridge has seen a 3.86% rise and Romford has enjoyed rent increases of 3.53%.

Pinpointing the areas where rent has room to grow is so crucial for investors, but it’s much easier said than done. The prospects are good though, with the Association of Residential Letting Agents (ARLAPropertymark) reporting in September that, year-on-year, almost a third of tenants (31%) have seen their rents rise, compared to 27% a year ago.

What next for landlords?

This Autumn’s Budget was mercifully short on yet more changes for landlords to get to grips with. The market has undergone quite enough fundamental realignments in recent years, so a little more breathing space is certainly welcome.

Whilst there remains the great unknown of Brexit, the truth is that, even with the improving levels of housebuilding, the demand for rental accommodation will persist.

Share of New Lending for Buy-to-Let Drops to Lowest Level since 2012

Published On: December 12, 2018 at 10:29 am

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The share of new lending for buy-to-let properties dropped to its lowest level since 2012 in the third quarter (Q3) of 2018, according to the latest Mortgage Lenders and Administrators Statistics from the Bank of England (BoE).

During Q3, the share of new lending to buy-to-let landlords decreased to 12%, which is the lowest level recorded since Q4 2012.

On the other hand, the share of new lending to first time buyers remained steady in Q3, at 21%.

Overall, the outstanding value of all residential mortgage loans continued to increase in Q3, to £1,430 billion, which is 3.2% higher than in the same period of 2017.

The value of gross mortgage advances grew by 3.7% in the year to Q3, to reach £73.5 billion. This is the highest level seen since Q4 2007.

New mortgage commitments (new lending that lenders have agreed to advance in the coming months) were 4.7% higher than a year ago in Q3.

Remortgaging, as a proportion of new lending, was two percentage points higher than Q3 2017. However, it dropped marginally on a quarterly basis, to 30%.

The proportion of high loan-to-income (LTI) lending (loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers) has risen by 1.8 percentage points in Q3, to 47%. The share of loan with a loan-to-value (LTV) ratio exceeding 90% also increased, to 4.3%.

The value of outstanding mortgage balances with some arrears increased for the first time since Q2 2016, to £14.5 billion, compared to £14.3billion in Q2 2018. These balances still account for only 1% of the total.

Share of New Lending for Buy-to-Let Drops to Lowest Level since 2012

Mark Pilling, the Managing Director of Spicerhaart Corporate Sales, comments on the release: “The latest Mortgage Lenders and Administrators Statistics reveal that the value of outstanding mortgage balances with some arrears increased for the first time since 2016 Q2, to £14.5 billion.

“With the recent rate rises, I had predicted we would start to see arrears rise again, and I fear this could be the start of a more permanent shift. Consumers racked up a record £17.1 billion of credit card debt in October – 11.6% higher than a year earlier – and October is not usually a month associated with big spending. Since those stats, we have had a record spending day on Black Friday, most of which was online, so likely to be spent on cards, and we have Christmas coming up – traditionally a time when many families overstretch themselves in terms of spending.”

He continues: “There are growing concerns that many people are now relying on credit cards for everyday purchases, and, while many in this situation are able to keep their heads above water now, if there is another rate rise, payment shock coming off a fixed rate deal or rise in the cost of living, many people may struggle to make their monthly mortgage payments or rent – which, in turn, will impact landlords and, where appropriate, their ability to make mortgage payments.

“Repossession should always be the last resort, and lenders should always look to find another option if it is available. We can help lenders find solutions that best suit them and their customers, so it is important that lenders start looking at all their borrowers and identify those who are already having difficulties managing their mortgage, or are likely to experience future difficulties.”

Shaun Church, the Director of mortgage broker Private Finance, also responds to the report: “High LTI lending is at its highest level since the financial crash, accounting for nearly half of all new lending. With the property market stagnating, banks and building societies have been drumming up business elsewhere, by relaxing their lending criteria and increasing income multiples. In recent weeks, we have seen some lenders increase their income multiple to up to six times the annual income of borrowers.

“Income criteria has long been the primary obstacle for first time buyers looking to purchase their first home, this relaxation by lenders has therefore been welcomed and embraced by borrowers across the UK. And, with mortgage rates hovering near record lows, servicing a larger mortgage is unlikely to be too great a financial burden, for now. However, with interest rates expected to nudge upwards, slowly but surely, borrowers pushing themselves to the limits of affordability run the risk of overextending themselves when rates do eventually increase. Before rushing into a higher income multiple, borrowers should think carefully about potential rates and repayments, and more broadly about their future financial circumstances and commitments, to ensure they’re not putting too great a strain on their finances.”

He adds: “While these products adhere to stringent stress testing, and we’re far off from the lending levels of the past, those looking to borrow greater sums in relation to their income should be cognisant of the risks associated with such products. Seeking the advice of an independent mortgage broker can help borrowers ensure they opt for the right mortgage to match their needs and circumstances.”

Deal or No-Deal: Brexit and the Ongoing Problems of the Housing Market

Published On: December 12, 2018 at 9:56 am

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Alexandra Morris, the Managing Director of online letting agent MakeUrMove, outlines the consequences for homeowners and homebuyers of the UK, depending on whether the Government can secure a good Brexit deal, or we leave without one.

A no-deal Brexit would pour fuel on the fire of the current housing market crisis, with house prices falling sharply in the short-term, and a rocky path ahead for homebuyers and sellers alike.

The worst-case scenario of a no-deal could see homeowners trapped in negative equity and estate agents struggling due to a lack of properties to sell.

This Sunday, Theresa May is due to present the finalised Brexit deal to the summit of European leaders, and, with many issues – including access to the EU Single Market and Gibraltar – still seemingly unresolved, a firm deal for the UK still appears to be on shaky ground.

No-deal – what happens next?

The biggest impact of a no-deal Brexit in relation to housing is a potential fall in house prices – the Bank of England has warned that it could lead to a fall of up to 35% in house prices, although this is a worst-case scenario. As a result of a fall, many homeowners could find themselves in negative equity, trapping them in properties that aren’t worth as much as their mortgages.

The industry is hopeful that this will be a short-term blow, but it’s expected that the housing market will slow down dramatically in the meantime, as home movers slam the brakes on plans to buy or sell, adopting a wait-and-see policy.

Deal or No-Deal: Brexit and the Ongoing Problems of the Housing Market

A fall in house prices because of a no-deal Brexit may provide some opportunities for property to be bought by first time buyers. However, because it will be a time of uncertainty, it’s likely that people will be more cautious about making commitments, such as buying property, and buying conditions may become more difficult. Instead, it’s likely larger landlords will acquire these properties, as they will be able to spread the risk.

Leaving with a strong deal

On the other hand, if we can negotiate a strong deal with the EU, we could see a buoyant property market for all parties in 2019, with a renewed confidence after a very shaky period for the UK as a whole.

Leaving with a good deal could drive the market upwards in the latter part of next year, as strengthened consumer confidence leads to stability – which is what we need in the industry right now, after a prolonged period of uncertainty.

It is also worth adding that, if Theresa May and her Cabinet negotiate a good deal with the EU, we will have until December 2020 before anything fundamental changes, and, during this transition period (which could yet be extended), we will still be subject to existing EU regulations, giving the industry a much-needed adjustment period. If we failed to reach a deal, we wouldn’t have this adjustment period, and – having exited sharply – things will be far more uncertain for the economy and, as a result, the housing market.

Housing market crisis – deal or not

Although it’s crucial for estate agents and the housing industry to prepare for the worst, the reality of Brexit will hopefully be slightly less dramatic, even if we do reach a no-deal situation. The financial crash of 2007/08 hit our sector hard, and Brexit is predicted to be less harmful for the economy as a whole.

A bigger concern should be that the housing market is currently suffering from market failure. This is one of the biggest problems our economy faces. A major worry about the effect of a no-deal Brexit has to be that the Government is distracted by the task of negotiating our ongoing trading relationship in the transitionary period, taking their attention away from solving the problems we already have in the housing market.

We saw this in the Budget, where, despite the complete failure of the housing market, only small concessions were made on housing. This really needs to be looked at as a priority, as the housing market overall requires a rethink, with significant investment from the Government to boost infrastructure and allow first time buyers to get on the ladder.

The concern is that Brexit, whether with a deal or not, will in the short-term, at least, negatively affect the economy and reduce the Government’s ability to spend. We’ve already seen a huge fundraising drive since the Brexit vote, with tax increases hitting groups like landlords. As the Government scrambles to replace lost revenues in the wake of Brexit, the fear is housing will slip further down the priority list.

Currently, the retrospective, piecemeal approach leaves a lot to be desired, and a joined-up, proactive approach from the Government and lenders needs to be adopted, deal or no-deal.

Half of Tenants use Letting Agents to Find Accommodation, Zoopla Reports

Published On: December 12, 2018 at 9:10 am

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There has been a significant increase in the amount of private tenants using letting agents to find new accommodation, according to the latest State of the Property Nation report from Zoopla.

The property portal found that almost half (48%) of tenants used a letting agent to source their rental property this year, which is up from the 36% recorded in the 2017 edition of the report.

Of the 6,000 people surveyed for the study, 62% said that they expect to rent for at least the next three years, while 23% believe that they will rent a home indefinitely.

Meanwhile, the proportion of homeowners letting properties rose from just 2.4% in 2016 to 4.2% this year.

However, the research also shows that landlords are still facing a number of challenges in the existing housing environment.

Of those surveyed, 56% of landlords said that their biggest challenge is finding suitable tenants. The next greatest obstacle for landlords is ensuring that their tenants look after their properties (55%), followed by making sure that tenants pay their rent on time (47%).

Almost four in ten (39%) landlords confessed to struggling to keep up with increased regulation, while slightly more than a third (36%) are concerned about how future legislation will affect them.

Half of Tenants use Letting Agents to Find Accommodation, Zoopla Reports

Letting agents are also worried, as four in ten are expecting a drop in lettings revenue next year, Zoopla reports.

The fears arise as agents face the prospect of the tenant fees ban being introduced during 2019.

Zoopla found that 38% of the 600 agents polled are anticipating a drop in lettings revenue, in part because of the fees ban, but also over concerns about the number of rental properties coming to market.

Charlie Bryant, the Managing Director of Zoopla’s Property Division, comments on the report: “It’s certainly a challenging time for lettings agents, with the ban on lettings fees looming. However, our research shows that demand for agents’ services and rented accommodation are strong, and that should come as a welcome boost.

“As the market becomes more regulated and complex, the letting agents that adopt a more consultative approach with both their landlord and their tenant clients, to help navigate them through, will gain an advantage.”

He insists: “Staying ahead of the changing market and new rules is becoming more important than ever, and those who do it best are set to thrive.”