Posts with tag: buy-to-let finance

Amount of Landlord MPs Rises by a Quarter Since Last Parliament

Published On: January 15, 2016 at 3:06 pm

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The amount of MPs renting out private homes has risen by a quarter since the last parliament, with David Cameron and George Osborne both acting as landlords.

Around a third of MPs now rent out homes, with 196 declaring rental income on the official register of interests this year. Most of these earn over £10,000 per year from the property, supplementing their basic MP’s annual salary of £67,060.

Amount of Landlord MPs Rises by a Quarter Since Last Parliament

Amount of Landlord MPs Rises by a Quarter Since Last Parliament

The Conservative Party has the highest number of landlord MPs, at 128. This means that 39% of Conservative MPs are landlords, compared to 26% of Scottish National Party (SNP) MPs and 22% of Labour MPs.

The figures show that a much higher proportion of MPs are landlords than the general adult population, of which only 2% are private landlords.

Since winning the election in May, David Cameron has celebrated the importance of homeownership by proposing an extension of the Right to Buy scheme to housing association tenants and enforcing various schemes designed to help generation rent.

Additionally, Chancellor George Osborne has implemented many measures to control the buy-to-let boom, such as the additional 3% Stamp Duty for private landlords and second home buyers, and reducing mortgage interest tax relief for buy-to-let investors.

However, both MPs are landlords themselves. The Prime Minister’s rental property is alleged to be a four-bedroom house in Notting Hill that he purchased in 2005 for more than £1m. It is thought that the home has since doubled in value. Osborne has rented out a London property since 2011.

Other Conservative landlords include the Housing Minister, Brandon Lewis, who rents out a house in Essex that brings in over £10,000 per year.

The Housing and Planning Bill, currently on its way to the House of Lords, has been criticised by Jeremy Corbyn, the Labour Party leader, who opposes the extension of Right to Buy and the failure to address the shortage of housing.

Although the PM and Chancellor have supported schemes such as Help to Buy and Starter Homes, they have been accused of failing to protect social housing, abolishing the requirement for house builders to develop affordable housing, and not building enough new homes.

The Conservatives have faced further criticism this week after the majority rejected a Labour amendment to the Housing and Planning Bill, which would have ensured all rental homes are fit for human habitation. Read more: /conservatives-reject-move-to-ensure-rental-homes-are-safe/

As well as renting out private homes, 18 MPs have a shareholding, interest or directorship in at least one property firm.

David Tredinnick is the director of Malden Mitcham Properties and declared £22,311.52 of income from his 12 hours’ work for the firm each month.

James Cartlidge is the founder and former co-director of Share to Buy, a shared ownership company. He maintains shareholdings.

Landlords and Agents Warned that Buy-to-Let Mortgages Could Crash

Published On: December 18, 2015 at 9:43 am

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The private rental sector looks set to face further pressure, as the Government reveals that the Bank of England (BoE) will be given extra powers to regulate buy-to-let finance.

This announcement has added to the series of changes that will affect landlords and the lettings industry.

From April, buy-to-let investors and second home buyers will face a further 3% Stamp Duty charge when they purchase a property.

Additionally, the amount of mortgage interest tax relief for landlords will be reduced and those selling up will have to pay capital gains tax (CGT) much sooner than they do at present.

The Treasury has launched its consultation on cracking down on buy-to-let borrowing, which includes draft regulation.

Landlords and Agents Warned that Buy-to-Let Mortgages Could Crash

Landlords and Agents Warned that Buy-to-Let Mortgages Could Crash

The BoE’s Financial Policy Committee (FPC) would be given powers to limit what buy-to-let investors can borrow. This could mean lower loan-to-value ratios (LTVs) or a higher ratio of rental income to cover mortgage payments.

Chancellor George Osborne says the consultation “is the next step in ensuring that the FPC has the tools it needs to protect our economy”1.

The Residential Landlords Association (RLA) opposes the plans, stating that making access to buy-to-let lending harder could cut the supply of rental homes.

Chairman of the RLA, Alan Ward, claims: “There is no clear evidence that the property boom is caused by buy-to-let investors, when rising prices are mainly concentrated in London and the South East.

“This is largely fuelled by foreign investors and speculators treating our property as a commodity.

“The RLA supports the principle of the BoE ensuring that lending does not pose a risk to the stability of the financial sector. It is important that lenders do not saddle landlords with debts which they cannot pay back. But landlord investment is essential to the supply of homes to rent.”

He adds: “The overwhelming majority of landlords are responsible borrowers providing homes as a long-term business.”1 

The Council of Mortgage Lenders (CML) expects the number of buy-to-let mortgage products to fall by 22% in the next two years.

It has estimated that there were 116,000 new buy-to-let mortgages this year – the highest since 2007. Next year, it predicts that this will drop to 105,000 and to 90,000 in 2017.

The CML’s Paul Smee comments: “We understand the rationale for putting the macroprudential tools at the BoE’s disposal, but also recognise that this does not necessarily mean they will be used.

“In our view, buy-to-let does not constitute a market that currently requires further macroprudential intervention, especially as the effect of several recent tax changes is yet to be fully felt and evaluated.

“We urge policymakers to be mindful of the risk of unintended consequences that could adversely affect the private rented sector, alongside their focus on ensuring that the buy-to-let market does not pose a threat to financial stability.”1 

The consultation follows an interview with the head of the BoE, Mark Carney, who expressed he is “fearful of the risk that investors would all seek to sell at the same time if there were a general decline in house prices”1.

However, the Managing Director of Hunters estate agents, Glynis Frew, has also voiced his concerns. He says: “There have been a number of attacks on landlords recently, including the Autumn Statement’s 3% Stamp Duty announcement.

“Landlords as a whole are being portrayed as greedy investors who are looking to take advantage of tenants. This is simply not the case. The majority of landlords actually own one buy-to-let property and are your typical average Joes.

“It seems strange that no such restriction is in place for those with multiple properties of 15 or more.

“Such financial burdens will inevitably lead to a further rise in rents, as landlords will have to compensate for the extra measures somewhere.”1

The consultation is open until 11st March 2016 and can be found here: https://www.gov.uk/government/news/government-launches-consultation-on-further-housing-market-powers-for-the-bank-of-england

1 http://www.propertyindustryeye.com/agents-and-landlords-alerted-as-buy-to-let-mortgages-look-set-to-plunge/

 

Another Buy-to-Let Lender Tightens Criteria

Published On: December 10, 2015 at 3:56 pm

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Another Buy-to-Let Lender Tightens Criteria

Another Buy-to-Let Lender Tightens Criteria

Godiva Mortgages, part of Coventry Building Society, has announced that it is introducing tougher criteria for buy-to-let landlords.

At present, Godiva requires buy-to-let borrowers to have a rental cover of at least 125%, with the interest rate calculated at 5%, regardless of the pay rate.

However, landlords with a deposit of less than 35% will now be required to have rental cover of 125%, calculated on a higher rate of 5.5%.

For those taking out a five-year fixed rate deal, the change will not apply.

The announcement arrives after the Bank of England (BoE) released a report that suggests it may intervene in the buy-to-let market. This could come in the form of new affordability rules or lending caps.

Barclays has already tightened its lending criteria for buy-to-let borrowers. It recently raised the rental cover required by landlords from 125% to 135%, calculated on a pay rate of 5.79%. Find out more here: /barclays-is-first-major-lender-to-tighten-buy-to-let-criteria/

SPF Private Clients’ Mark Harris predicts: “The market is moving towards a situation where only those with a 50% deposit are likely to qualify for a loan.”1

What do you think of the changes and will these affect your future investments? Keep up to date with all things buy-to-let finance at LandlordNews.co.uk.

1 http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12027732/Buy-to-let-investors-will-need-50pc-deposit-or-no-mortgage.html

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank of England Commissions Analysis of Buy-to-Let Market

Published On: September 29, 2015 at 2:52 pm

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The Bank of England (BoE) fears that the buy-to-let mortgage market, alongside the economic crash in China, could have a detrimental effect on the UK’s banking system.

Policymakers are examining the buy-to-let sector, seeking any measures by lenders that could make it easier for prospective landlords to obtain loans.

The Bank is also concerned that a substantial drop in house prices could cause landlords to sell their properties, worsening the decrease.

The BoE reports that the “downside risks” of stability have grown since July, specifying the market insecurity caused by China’s stock market crash in August. On so-called Chinese Black Monday, the FTSE 100 index of leading stocks lost over £60 billion.

The Bank is commissioning a study of this contagion and the impact of computer trading strategies.

Bank of England Commissions Analysis of Buy-to-Let Market

Bank of England Commissions Analysis of Buy-to-Let Market

In its quarterly report on potential risks to the financial market, the BoE says it is not taking any immediate action to slow down the buy-to-let sector, where the majority of mortgages are interest-only. However, it is considering whether the buy-to-let boom could aggravate rises and falls in house prices.

The Bank has published figures revealing that buy-to-let mortgage lending rose by over 40% since the 2008 financial crisis, while owner-occupier lending increased by just 2% over the same period.

The Financial Policy Committee (FPC), which was created by the coalition government to spot potential threats to financial stability, reports: “Buy-to-let mortgage lending has the potential to amplify the housing and credit cycles, though the extent of the amplification is hard to judge because the market has only recently grown to significant levels.

“Any increase in buy-to-let activity in a upswing could add further pressure to house prices. Buy-to-let investors may further exacerbate a downturn if they expect rental incomes to fall below their interest payments, and consequently add to selling pressure.”

The FPC says there is evidence that 40% of buy-to-let landlords would sell their properties if their rental income fell below their interest payments.

The FPC first began monitoring the buy-to-let market in July, when it expressed concerns over the level of household debt.

In its most recent update, the BoE states that the rapid growth of the buy-to-let sector is the reason for its call for the Government to give it powers to intervene in the market, as it can with residential mortgages. A consultation is scheduled for this year.

The Bank says: “The FPC is alert to the rapid growth of the market and potential developments in underwriting standards. As the market continues to grow, particularly if driven by loosening of underwriting standards, the sector could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market. Intensified completion among lenders could lead to loosening underwriting standards in future.”

The FPC has also conducted an annual review of the effect of the Help to Buy scheme on the sector. The incentive allows buyers with 5% deposits to purchase a home. Its conclusion states: “The scheme does not pose material risks to financial stability.”

It its latest study, it also considers global risks, highlighting the potential lessons from Chinese Black Monday, when there were over 1,000 temporary suspensions on individual equities on the New York Stock Exchange. The FPC has called for analysis from the Financial Conduct Authority (FCA) on the way contagion spreads between markets.

The FPC says: “The committee is alert to the possibility that future heightened volatility and reductions in market depth could have more widespread and persistent effects, including on the provision of credit to the real economy.”

In July, the FPC was wary of Greece’s financial situation, but concludes that the risk has subsided: “However, other downside risks to UK financial stability stemming from the global environment, and to which the United Kingdom as a global financial centre is exposed, have increased. These risks come from both China and emerging market economies more broadly.”

The results of bank stress tests will be revealed in December, looking at their ability to endure global threats and the impact/scale of future fines for misconduct.

The FPC adds: “The scale of future misconduct and redress costs for the UK banking sector is highly uncertain and banks should hold sufficient resources to pay these costs without affecting their ability to continue to lend to the real economy.

“The committee will review potential future costs as part of the 2015 stress test of the UK banking system.”1

1 http://www.theguardian.com/business/2015/sep/25/bank-england-buy-to-let-scrutiny-china-mortgage-lending

 

 

Landlords to Buy More Properties in Next Six Months

Published On: June 2, 2015 at 2:51 pm

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A report has revealed that two-thirds of landlords are planning to buy at least one more property in the last half of the year.

Landlords to Buy More Properties in Next Six Months

Landlords to Buy More Properties in Next Six Months

Research by buy-to-let mortgage broker Mortgages for Business found that 65% of investors renting out homes intend to expand their portfolios in the next six months, up from 55% at the beginning of the year.

The report also uncovered that only 8% of UK landlords are planning to sell some of their rental properties before the end of 2015 and a further 27% will keep their portfolios at their current size for the near future.

David Whittaker, Managing Director of Mortgages for Business, says: “Landlords are better capitalised and now more confident about reinvesting. A strong rental market is being driven by tenants moving to make the most of job opportunities.

“That new surge of demand is putting more upwards pressure on rents and landlords are only just beginning to supply more homes to let in response.”1 

The study also questioned landlords about the support they receive from mortgage lenders, discovering that just 30% believe lenders do enough to understand the needs of property investors.

Furthermore, 20% said they think mortgage lenders should loan larger amounts and another 20% would like lenders to reduce their rates even further than the current record low.

Mortgages for Business also revealed that 57% of landlords think that lenders should ease the criteria that they measure borrowers against before offering them a loan.

1 http://www.rman.co.uk/latest-news/article/buy-to-let-purchases-to-increase-over-next-six-months