Posts with tag: buy to let market

New Bank of England powers target BTL lenders

Published On: March 29, 2016 at 10:56 am

Tags: Bank of England,buy to let market,buy to let mortgages,Buy-to-Let,chancellor,Mortgage lending

Today has seen the Prudential Regulation Authority publish a report regarding underwriting standards for buy-to-let mortgage lenders. This report addresses potential ways to control the volatile buy-to-let market, in a bid to negate the chances of another crash.

Clampdown

As expected, The Bank of England has said it is to implement new, tougher quality assessments on buy-to-let lenders. The Prudential Regulation Authority is to put a, ‘guardrail,’ in place to stop banks from giving risky loans, noting that as many as one in five lenders does not carry out the sufficient checks.

This clampdown comes as concern grows over the notion that there is a bubble in the buy-to-let market, which could ultimately cause the wider property market to slow.

Following the Chancellor’s perceived attacks on the sector, including the 3% additional stamp duty charges on buy-to-let purchases, the Bank has now also weighed in.

Affordability

The Bank believes that lenders should impose affordability checks on all buy-to-let landlords. It said that borrowers should consider how much money borrowers had to cover their interest payments, should costs rise up to 5.5%.

New Bank of England powers target BTL lenders

Presently, five of the twenty lenders under scrutiny from the Bank do not impose these standards. The Bank is hopeful that these measures will cut the predicted growth of buy-to-let mortgage lending from around 20% a year to 17%.

Though less severe than first feared, the measures could be reviewed later in the year, according to the Chancellor.

In his address to the Treasury committee, Mr Osborne said, ‘the Bank of England and the financial policy committee have identified potential systematic risks in the large increase in the buy-to-let market. It is highly likely we will give the FPC powers over the buy-to-let market. It is possible we can do that later this year.’[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-to-be-reined-in-by-new-boe-powers.html

Government launches consultation on BTL regulations

Published On: December 31, 2015 at 11:47 am

Author: Em Morley

Categories: Finance News

Tags: buy to let market,Buy-to-Let,legislations,rental market,Stamp Duty

The Government has today launched its promised consultation on the jurisdictions that the Bank of England’s Financial Policy Committee should be allowed to implicate over the buy to let market.

This has been implemented in order to ascertain information on how the operation of the nations buy-to-let mortgage market could represent a risk to financial stability.

Targeted

Aimed primarily at individuals, institutions and associated bodies that could potentially be affected by the FPC’s powers of direction, the Government said it also would appreciate the views of other parties with an interest in housing market policies.

After the consultation has taken place, the Government has pledged to continue to examine the responses and utilise them accordingly to devise their instrument to place powers in legislation.

The Government believes that the Bank of England should have more powers to restrain the buy-to-let market if required. This could include directing regulators to permit lenders to put limits on their buy-to-let output.

In addition, the amount that buy-to-let investors could borrow or LTV could be altered and the Bank could also change the required ratio of perceived rental income to mortgage interest payments.

At present, lenders are not currently supportive of more controls for the market and warn that it does not necessarily need more regulations.

Changes

There have been calls for upcoming changes to the market, such as the 3% stamp duty charge from April, to take effect before any additional regulations are made. The Council of Mortgage Lenders director general Paul Smee said, ‘we understand the rationale for putting the macro prudential tools at the Bank of England’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 macro prudential intervention, especially as the effect of several recent tax changes is yet to be fully felt and evaluated.’[1]

‘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, ‘ he added.[1]

Government launches consultation on BTL regulations

Confusion

Peter Williams, director of the Intermediary Mortgage Lenders Association, said that the industry could be confused by what the Government is trying to implement.

Williams said, ‘in the Autumn the Chancellor, in giving evidence to the Treasury Select Committee, appeared to state unequivocally that the power to place limits on place limits on buy to let mortgage lending was to be granted without the previously advertised consultation having taken place as to whether new powers were justified at all.’[1]

‘Recently the Governor of the Bank of England also appeared to suggest that he was preparing to exercise such powers,’ he continued. ‘Now the consultation on what those powers might be has finally materialised, there is much that should be discussed and challenged.’[1]

‘The points advanced in support of further regulation do not appear to be well supported by evidence. At the same time there is considerable work required on the part of lenders and trade bodies to bring together a detailed response, and we should be reassured that this will not be a waste of time if the consultation is simply to rubber stamp a decision already made behind the scenes,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-regulation-2015123111379.html

Another Buy-to-Let Lender Tightens Criteria

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

Author: Em Morley

Categories: Finance News

Tags: buy to let investors,buy to let market,buy to let mortgages,buy-to-let finance

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.

¹http://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 Stress Tests Results Revealed

Published On: December 2, 2015 at 9:14 am

Author: Em Morley

Categories: Finance News

Tags: Bank of England,buy to let market,Buy-to-Let,economy,Mortgage lending,mortgages

Bank of England Stress Tests Results Revealed

The Bank of England (BoE) has revealed the results of its stress testing on the UK banking system. It plans to take action to cool the buy-to-let sector, as the market continues to grow.

The BoE has also informed UK banks that they could be forced to hold up to £10 billion of capital ahead of a potential economic downturn.

The stress tests were designed to measure how banks would deal with another financial crisis. The BoE reports that Standard Chartered and the Royal Bank of Scotland (RBS) are in the weakest financial positions.

It believes that both would have been unable to endure a shock to the financial system had they not already taken action to strengthen their financial position over the year.

For months, the BoE has raised concerns over the buy-to-let mortgage market. Although it has not taken immediate action to cool this sector, it announced that it is reviewing the lending criteria used by firms and is “ready to take action”.

It will also observe the impact of the extra 3% Stamp Duty imposed on buy-to-let landlords, as announced by Chancellor George Osborne in last week’s Autumn Statement.

The buy-to-let sector has experienced “rapid growth” recently, with lending rising 10% in the first nine months of 2015.

It is expected that changes to landlord taxes, including the reduction in buy-to-let mortgage interest tax relief from April 2017, will cause some investors to leave the market altogether or sell some of their properties. The additional Stamp Duty may also cool the market.

Read the Bank’s complete stress tests results here: http://www.bankofengland.co.uk/financialstability/Documents/fpc/results011215.pd

How do you think the buy-to-let sector will change in the short term and further into the future?

Fireman landlord jailed after fatal blaze

Published On: November 23, 2015 at 11:49 am

Author: Em Morley

Categories: Landlord News

Tags: buy to let market,fire safety,landlords

A landlord who was an operational fireman at the time an arson attack killed five members of a family in one of his properties has been put behind bars.

Mr Jay Liptrot, one of the firefighters called to the scene of the blaze, tried in vain to save members of the young family.

Heartbreaking

In a harrowing case, the fire was proved to have been started by a neighbour, who was jailed for life for the murder of the five people. Melanie Smith, ordered to serve a minimum of 30 years, was found guilty of deliberating setting fire to a pram in the communal hallway of the accommodation.

Mr Liptrot faced 5 charges of manslaughter at the beginning of his trial. However, these charges were subsequently dropped after he pleaded guilty to the lesser charge of failing to take the necessary fire safety precautions.

Caernarfon Crown Court heard that a simple fire door, costing around £250, would have restricted the flow of the fire for roughly 30 minutes. The firefighters arrived on the scene within 6 minutes of the 999 call.

Inadequate

The court also heard that a, ‘woefully inadequate,’ door made from glass and thin wood failed to form a sufficient barrier to protect the family, made up of a couple aged 23 and 20, and three small children, aged 4, 2 and 1.

Mr Lipton had been a firefighter for 15 years at the time of the fire but his since lost his job. He was sentenced to 15 months in prison, alongside costs of £4,299 and a £100 victim surcharge.

Fireman landlord jailed after fatal blaze

Despite this, he still owns a further 11 properties in the Prestatyn are. Following the case, North Wales Fire and Rescue said that it is introducing a new policy, which will require staff to declare any conflict of interest.

Safety

Passing sentence, Mrs Justice McGowan noted, ‘Jay Liptrot has generally been a good and conscientious landlord. However, his culpability must be categorised as high.’[1]

Simon Smith, chief fire officer of North Wales Fire and Rescue Service, added that Mr Liptrot would be the subject of an internal investigation. ‘As a responsible employer whose priority is the safety of the public, it is of course of deep concern to us that an employee, as a landlord, failed to take precautions to ensure this property was safe which not only goes against legislation but also against the core values of our service,’ he stated. {!}

[1] http://www.propertyindustryeye.com/landlord-who-was-a-fireman-is-jailed-after-blaze-killed-tenants/