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Around 80% of Buy-to-Let Mortgage Applications made by Limited Companies

Published On: October 16, 2017 at 9:43 am

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Almost four out of every five pounds lent for buy-to-let purchases via Mortgages for Business was borrowed by a limited company landlord in the third quarter (Q3) of the year, according to the firm’s latest Limited Company Buy-to-Let Index.

Around 80% of Buy-to-Let Mortgage Applications made by Limited Companies

Around 80% of Buy-to-Let Mortgage Applications made by Limited Companies

This represents 79% of completing buy-to-let purchases by value, up from 73% in Q2.

The index also shows that mortgage activity by landlords using limited companies remained high generally throughout the quarter. Limited company transactions (for purchases and remortgages) accounted for 48% of buy-to-let completions in Q3 by number of mortgages, and 47% by value of lending.

The increase in the use of limited companies by landlords is also reflected in statistics held by Companies House, which show that there was a spike in registration for Special Purpose Vehicle (SPV) limited companies (with property related SIC codes) in 2016, following the 2015 Summer Budget, in which the former chancellor, George Osborne, announced changes to mortgage interest tax relief for individual investors.

Steve Olejnik, the COO of Mortgages for Business, comments: “There was, unsurprisingly, a spike in SPV registrations last year, but it looks like the numbers have been increasing for considerably longer than might be expected. Looking at historic registrations, numbers have been on the rise ever since 2008, which, I’m sure you can guess, was not a popular year to start a property company.

“That said, the 2015 Summer Budget has noticeably sped things up, with 2015 and 2016 showing the strongest growth in registrations in the sample, whether proportionally or in absolute terms. Over 20,000 new SPVs were registered in the year so far compared to c.13,000 in 2014 – scaling up suggests a figure somewhere just shy of 35,000 by the end of the year, an increase of c.35% over 2016.”

He explains: “Landlords are turning to SPVs because of the benefits they bring in the form of tax efficiencies and softer affordability testing. Switching to corporate structures is not without risk, however, and we recommend all our clients take professional tax and finance advice before deciding how to proceed.”

The index also reveals that pricing of buy-to-let mortgages available to limited companies saw a marked contrast between fixed and variable rate products. While fixed rate products experienced no change in pricing for two, three or five-year terms, variable rate products saw a sharp drop in pricing, down by 0.4% to 4.0%. These products are now competitive with their fixed rate counterparts.

Mortgage Lending Strengthened in August, Reports UK Finance

Published On: October 16, 2017 at 9:27 am

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The latest UK Finance data shows that lending for house purchase was higher in August 2017 than in both the preceding month and a year earlier.

Mortgage Lending Strengthened in August, Reports UK Finance

Mortgage Lending Strengthened in August, Reports UK Finance

During August, first time buyers borrowed £5.7 billion – 16% more than in July and 12% up on August 2016. They took out 34,400 mortgages – 14% higher than the previous month and 9% higher on an annual basis.

Home movers borrowed £8.4 billion in August – 18% more than in July and 20% higher than in August last year. This equated to 38,500 loans – up by 17% month-on-month and 13% on August 2016.

Remortgaging by homeowners totalled £6.4 billion in August – 4% less than in July, but 8% higher than the previous year. The number of people remortgaging totalled 36,700 – down by 1% on July, but 5% up on August last year.

Buy-to-let lending totalled £3.1 billion in August – down by 3% on July this year and the same level as in August last year. This equated to 20,400 mortgages – the same as in July, but 4% higher than in August 2016.

The Head of Mortgages Policy at UK Finance, June Deasy, comments: “Activity picked up in August, and recent resilience ensured that borrowing by home movers was at its highest since March 2016, when transactions were boosted by an imminent increase in Stamp Duty.

“Over the last 12 months, the number of people remortgaging has been higher than in any period since late 2009. With mortgage rates close to historic lows and the likelihood of a rise in official rates moving closer, the popularity of remortgaging looks set to continue.”

On a seasonally adjusted basis, borrowing by first time buyers and movers increased by both value and volume. There was a decline in both the number of people remortgaging and the value of lending. The value of buy-to-let lending was unchanged, but there was a small decrease in the number of buy-to-let borrowers remortgaging.

The proportion of household income taken up by mortgage payments edged up for first time buyers in August (to an average of 17.5%), but was unchanged for movers (17.6%). Overall, it remains low by historical standards.

The average amount borrowed by a first time buyer rose from £138,999 in July to £140,035 in August. There was a smaller proportionate increase in the average first time buyer household income, up to an average income multiple of 3.63. The average amount borrowed by movers increased from £180,000 to £182,750, while their average income multiple rose to 3.40.

Remortgaging accounted for more than two-thirds (68%) of buy-to-let lending in August, however, it was 5% lower than in July. Borrowing for buy-to-let house purchase rose by 11%. Nevertheless, borrowing for house purchase by buy-to-let landlords remains at a lower level than before the introduction of the higher Stamp Duty rate last year.

Letting Agents Welcome New Inquiry into Private Rental Sector

Published On: October 16, 2017 at 8:28 am

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ARLA Propertymark (the Association of Residential Letting Agents) has welcomed the launch of a new inquiry into the private rental sector.

Letting Agents Welcome New Inquiry into Private Rental Sector

Letting Agents Welcome New Inquiry into Private Rental Sector

The Communities and Local Government Committee (CLG) will look into whether councils have adequate powers to tackle rogue landlords.

The inquiry, which follows a report published by the CLG in 2013, highlighting where the Government should take action to improve the private rental sector, will also look at whether landlord licensing schemes are promoting higher quality accommodation and the effectiveness of complaint mechanism for tenants.

The Chair of the CLG, Clive Betts MP, says: “With a big rise in the number of people renting over the last decade, there are real concerns about the ability of local authorities to protect tenants by tackling bad landlords and practices.

“Our inquiry will examine how local authorities can carry out enforcement work to deal with rogue landlords, as well as looking at approaches used by councils to provide private rented accommodation in their areas.”

ARLA Propertymark, one of the UK’s professional bodies for letting agents, has welcomed the inquiry as a “great opportunity” to review enforcement in the private rental sector.

David Cox, the Chief Executive of ARLA Propertymark, comments on the launch: “ARLA Propertymark welcomes this inquiry. This is a great opportunity to review enforcement in the private rented sector. For years, successive governments have introduced law after law with no evaluation of their effectiveness. With what appears to be a coherent strategy on the regulation of the PRS coming from the Government, it is an ideal time to review what has worked and what hasn’t.”

The CLG is now looking for written evidence for the inquiry by 24th November 2017, which you can submit online here: http://www.parliament.uk/business/committees/committees-a-z/commons-select/communities-and-local-government-committee/inquiries/parliament-2017/inquiry1/commons-written-submission-form/

Do you believe that the inquiry has come at a good time, and what do you think needs to be done moving forward?

The Top 10 Tips all Tenants Need to Know

Published On: October 11, 2017 at 9:43 am

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Whether you’re a first time tenant or an experienced renter, renting a property can present challenges for anyone if you’re unprepared. We have the top ten tips all tenants need to know…

From losing your deposit to falling foul of rogue landlords, it’s important that all tenants take the advice and help available to them to make the lettings experience as simple as possible.

ARLA Propertymark (the Association of Residential Letting Agents) shares its top ten tips to help avoid the common pitfalls of renting.

Sally Lawson, the President of ARLA Propertymark, says: “With more and more people completely priced out of the property market and a desperate shortage of housing, private rentals have become the norm. However, there is a lot to consider when choosing a property to rent and there can be a lot of unanswered questions, which can be overwhelming.

“The below checklist has been created to make sure your next letting experience is a positive one, including all there is to know on the process to make it as simple and stress-free as possible.”

Before you start looking:

Know what’s important to you 

The Top 10 Tips all Tenants Need to Know

The Top 10 Tips all Tenants Need to Know

Before you start looking for a new rental home, work out what’s important to you, such as the number of bedrooms or parking spaces the property has, as well as local amenities and proximity to friends, family, schools and work.

What can you afford?

Decide what you can afford before you start house hunting. Remember that you will also have to budget on top of your rent for household bills, including gas, electricity and water, internet, TV licence, contents insurance and Council Tax, as well as food and general household items.

Choose your housemates carefully 

Disagreements between housemates are very common in the rental sector. Conflicting lifestyles and personality clashes can cause misery and stress; remember that a fun friend is not necessarily a good housemate, so choose wisely.

When you’re looking:

Using a letting agent

If you are using a letting agent, make sure that it is a member of an authorised redress scheme, as this should mean that it has Client Money Protection (CMP). This ensures that, if the agent goes bust or runs off with your money, the scheme will reimburse you and make sure that you’re not left out of pocket. You will not get this protection if you rent directly from a landlord or through an unregulated letting agent.

Ensure you’re protected

You are entering a legally binding agreement when you sign a contract with your landlord, so don’t feel pressured to sign immediately. Make sure that you take your time to read the contract thoroughly. Ask as many questions as you want to, until you’re comfortable that you understand everything it contains. If you’re not happy, ask for any changes or amendments that you want.

Know your rights

Before you sign the tenancy agreement, you will be asked to provide proof that you have the right to rent in the UK, so make sure that you have your identification documents (such as your passport) to hand. After you sign the contract, you must be given a copy of your new home’s gas safety certificate (if the property has gas), its Energy Performance Certificate (EPC), the Government’s How to Rent guide, your deposit protection certificate and the prescribed information, and any licence for your property from the local council (if a licensing scheme exists in the area).

Once you’re in the property: 

Make sure your new home is safe 

Smoke alarms are required on all floors of your home and carbon monoxide detectors are needed in any room where solid fuels are burnt. These need to be tested and working on the first day of the tenancy; this is usually done at check-in. The landlord or letting agent will also probably undertake an inventory and schedule of condition at this point. Make sure that you go through these documents, and notify your landlord or agent if you disagree with what they contain, as this will affect how much of your deposit you get back at the end of the tenancy.

Sort out the bills and insurance

If this hasn’t been done by your letting agent, notify the utilities companies and give them meter readings, your move-in date and the names of all new tenants. Make sure that you have contents insurance – your landlord will insure the buildings and their own contents, but you need to cover your own belongings against loss or damage.

Address issues before they become bigger problems

Don’t be afraid to report repairs to your landlord or agent. It’s much easier, faster and cheaper for your landlord to fix an issue when you first notice it than when it becomes a bigger problem. If you leave the home empty for a prolonged period, consider leaving the heating on low to ensure that pipes don’t freeze during the winter. Also, if you’re going away for more than a couple of weeks, let your landlord or agent know so that they can keep an eye on the property.

Return the property as you found it

Most deposit disputes are over the condition of the property at the end of the tenancy. Make sure that you give the place a thorough clean before you move out and leave it in the same condition as the day you arrived.

We hope that these top tips help you on your way to having a successful lettings experience!

Increasing Number of Landlords Looking to Leave Sector, Law Firm Warns

Published On: October 11, 2017 at 9:05 am

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Increasing Number of Landlords Looking to Leave Sector, Law Firm Warns

Increasing Number of Landlords Looking to Leave Sector, Law Firm Warns

One of the UK’s leading law firms has warned that it is seeing an increasing number of private landlords looking to reduce or sell off their property portfolios.

Irwin Mitchell claims that this is a direct result of a host of changes being forced on landlords by the Government, which have made buy-to-let a less profitable investment option.

However, the firm warns that disposing of a buy-to-let portfolio may not be straightforward, with landlords being hit by hefty Capital Gains Tax (CGT) bills.

Irwin Mitchell says that landlords are being affected not just by legal changes, but also by growing anti-sentiment amongst the public being reported in the media, against the backdrop of the housing crisis.

In recent months, landlords have had to contend with more stringent mortgage lending, particularly for those with four or more properties, higher Stamp Duty costs on buy-to-let properties, the reduction in mortgage interest tax relief, and the possibility of rent controls, as proposed by the Labour Party at its recent conference in Brighton.

A Partner at Irwin Mitchell, Jeremy Raj, says: “It’s understandable that landlords who have been hit with some difficult changes to swallow are now thinking of exiting the buy-to-let market, in order to invest elsewhere. We’ve certainly seen an increase in enquiries from landlords worried about the future market.

“However, the CGT liability that will crystallise on each property sale must be factored in when weighing up whether it is best for landlords to divest of their property portfolio.”

He adds: “If the Government really wants to help young people onto the property ladder, it needs to combine the recent disincentives in the buy-to-let sphere with fulfilling its promises to get more housing built.”

The Prime Minister, Theresa May, recently pledged an additional £2 billion for building affordable homes. But is this yet another empty promise?

Property Price Vs. Desirability

Published On: October 11, 2017 at 8:01 am

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By Paul Mahoney, Managing Director of Nova Financial 

Paul Mahoney

Paul Mahoney

Seeking value is important when it comes to making any investment, but especially with property. Some property can be over-priced and others under-priced, and I know which side of that equation I’d prefer to be on.

Determining the price of a property isn’t an exact science, as even experienced surveyors generally determine property valuations based upon comparable sales in the area and a bit of good old-fashioned guess work. Websites such as Zoopla and Rightmove provide quick and easy valuation services, however, they often prove to be inaccurate, especially if there haven’t been many comparable sales to your property in that area.

When determining price, it is important to compare apples with apples. By that, I mean a brand-new property with all the latest bells and whistles, as well as the top of the range fixtures and fittings isn’t comparable to a 100-year-old property on the other side of town. Searching lowest to highest on Zoopla is a terrible idea, as you’ll first be presented with the cheapest and nastiest properties in an area.

Balancing price with desirability is very important. The abovementioned cheap properties are generally cheap for a reason, which is usually due to a lack of demand driven by a lack of desirability. This is the opposite of what you want when investing in property, as an undesirable property won’t rent or sell well. If you’re an experienced builder or fancy yourself as a Homes Under the Hammer contestant, then of course you could change that with a major renovation, but, for most mum-and-dad investors, the focus should be on passive income, not the business of property development.

Renovating properties to add value might be made to look easy by the likes of Sarah Beany, however, it is a profession and should not be taken lightly or assumed to be the easy road to riches. Many an investor has been burnt by dodgy-Dave builders, perceived fixer uppers, properties that cost way more to fix than they are worth, and estate agents that over promise and under-deliver, so buyer beware.

Balancing desirability with price is important. If you have the most desirable property in the most desirable location, it will rent and sell very easily, but that property will often be expensive. We like to target areas with strong rental yields, affordable property prices in comparison with average incomes, strong employment and employment growth, as well as infrastructure in place, as well as infrastructure spending underway; essentially, all the ingredients that equate to a market moving in the right direction.