Posts with tag: buy-to-let sector

A Year of Two Halves for Buy-to-Let Borrowing

Published On: November 25, 2016 at 11:34 am

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It’s been a year of two halves for buy-to-let borrowing, according to the latest financial results from Paragon Mortgages.

A Year of Two Halves for Buy-to-Let Borrowing

A Year of Two Halves for Buy-to-Let Borrowing

The firm reported a strong performance across all of its business lines in the year to October, contributing to a 9.1% increase in underlying profits, totalling £146.9m.

The Director of Mortgages at the group, John Heron, comments: “This was very much a year of two halves for buy-to-let, with very strong completion levels being seen in the run up to the Stamp Duty increase in April, followed by a commensurate reduction in activity levels across the market from April.

“However, our pipeline of new business is now gathering momentum with an increase of approaching 20% in October. Much of this is due to the success of Paragon Bank in providing us with diversified funding, allowing us to deliver a series of competitive products, which is driving an increase in application volumes.”

He continues: “In particular, we are seeing an improvement in the professional landlord segment of the market, a sector we are well positioned to satisfy, given our extensive experience of meeting their individual requirements.

“Whilst the buy-to-let market has had a challenging year, we continue to see the potential the sector has to offer. With strong rental demand, there will continue to be a growing need for professional landlords to provide quality private rental accommodation and, with our 20 years’ experience in the market, we remain very well positioned to work with these landlords.”

While buy-to-let borrowing may have had a mixed year, how has the rest of the market fared?

The British Bankers’ Association (BBA) has also published its High Street Banking Statistics for October.

It found that house purchase approval numbers are 10% lower than in October last year, while they’ve dropped by 4% in the first ten months of the year when compared to the same period of 2015.

However, the Chief Economist at the BBA, Dr. Rebecca Harding, says: “Mortgage approvals ticked up a little October. There has only been a relatively modest increase in activity since the Bank of England cut rates in August.”

Dudley Building Society Updates Buy-to-Let Range

Published On: September 2, 2016 at 8:32 am

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Dudley Building Society has released its latest set of updates for its buy-to-let range, featuring new products, comprehensive rate reductions and improved criteria.

Dudley Building Society Updates Buy-to-Let Range

Dudley Building Society Updates Buy-to-Let Range

The society, which announced strong annual results for the 2015/16 financial year, with pre-tax profits of £1,335,000, is responding to a buy-to-let sector that “needs encouragement”, according to the firm’s Head of Credit, Jonathan Moore.

The updates include a reduction in interest rates across all products, with all fixed rate products cut by 0.30%. Rates now start at just 2.99%, with products now including options with no Early Repayment Charges (ERCs).

Dudley has also introduced brand new three and five-year discount products, with a maximum ERC period of three years.

The majority of products now carry a new maximum borrowing value of £1m, up from £500,000, while the minimum income required has been reduced to £20,000 per application.

In addition, Dudley’s stressed rate calculation has been simplified, through the removal of separate requirements for flats. Loan-to-value (LTV) requirements on background residential property have also been cut.

Moore says: “Landlords have been in the firing line over the past 12 months because of the Stamp Duty changes and, with the tapering effect on tax relief due to start in 2017, it is important that lenders like the Dudley do everything that we can to provide the kind of products that offer value, flexibility and a common sense approach to underwriting buy-to-let mortgages.

“Therefore, our partners will be pleased with the overall reduction in rates, some of which start from 2.99%. We have introduced new three and five-year discounted products, as well as options which have no ERCs. Dudley Building Society continues to lead the way by working exclusively through intermediaries and being among the first to abolish upper age limits for applicants. On top of which has been our commitment to manual underwriting and a holistic approach to every enquiry, which has given us a deserved reputation for the kind of service that brokers require for their customers.”

Do these new updates encourage you to invest further in the buy-to-let sector?

Demand for Buy-to-Let to Remain Strong This Year, Believe Brokers

Published On: July 21, 2016 at 9:27 am

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Despite recent tax changes for landlords, many mortgage brokers believe that demand for buy-to-let investment will remain strong during the second half of the year, according to a new study by Legal & General.

Although the Government recently introduced a 3% Stamp Duty surcharge for buy-to-let landlords and second homebuyers, scrapped the 10% Wear and Tear Allowance, and plans to implement a

Demand for Buy-to-Let to Remain Strong This Year, Believe Brokers

Demand for Buy-to-Let to Remain Strong This Year, Believe Brokers

reduction in mortgage interest tax relief, buy-to-let still remains an attractive investment option at a time of low savings rate and stock market uncertainty. Average buy-to-let returns currently beat all other mainstream investments.

Yesterday, we released the Government’s guide to mortgage interest tax relief changes: /government-guide-tax-relief-changes-residential-landlords/

The Legal & General research shows that brokers in Scotland are the most confident in buy-to-let’s future, with 63% of Scottish brokers predicting that the sector will remain the same size as last year in 2016, despite a surge in activity in 2015.

This positivity north of the border is joined by confidence from brokers in Nottingham, where 57% expect the buy-to-let market to either expand or remain the same this year, followed by 49% in London.

However, confidence in the future of the buy-to-let market varies massively across the UK, with a huge 71% of intermediaries in Manchester believing that there will be a reduction in the sector this year.

The Director of the Legal & General Mortgage Club, Jeremy Duncombe, comments: “Despite a whirlwind of changes to the buy-to-let market, including the Government’s Stamp Duty hike and the reductions in tax relief on the horizon, it’s clear that a large number of brokers remain confident that buy-to-let will remain strong in 2016. Though there are concerns that Government interference could mean a reduction in buy-to-let activity this year, our research shows that many brokers in both England and Scotland believe the market to be well positioned to absorb the impacts of these measures.

“Even now, amid the uncertainty brought about following June’s referendum result, borrowers will be looking to remortgage their buy-to-let properties as a potential reduction in rates looms. Brokers need to grasp this opportunity by contacting their books now to ensure these individuals get the crucial advice they need when it comes to securing a better rate on their mortgage.”

Do you believe that the buy-to-let sector will remain strong over the next few months?

Preparing for Future Economic Changes in the Buy-to-Let Sector

Published On: May 21, 2016 at 8:17 am

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The Government’s clampdown on the buy-to-let sector will continue into next year, alongside economic changes that will have an effect on the property market. How should you prepare for any financial difficulties you may face?

Just next month, the country will vote in its first European referendum since 1975. It is believed that the EU vote will cause house prices and sales to drop, due to uncertainty in

Preparing for Future Economic Changes in the Buy-to-Let Sector

Preparing for Future Economic Changes in the Buy-to-Let Sector

the market. However, property professionals have called for a Brexit in a recent poll.

So should you continue to invest in property at this volatile time?

Nova Financial’s Managing Director, Paul Mahoney, explains: “Our advice to our clients is that property is a long-term investment and therefore isn’t about timing the market, but rather time in the market.

“All too often we meet with people in their 60s who have always had a reason not to invest, whether it’s a property bubble, tax changes, Brexit, Easter or Christmas, and unfortunately, these tend to be the people with little to no investable asset base, because they’ve always had a reason to wait. Those that invest in quality properties in areas with strong fundamentals ride out the short-term blips and achieve strong growth over the mid to long-term.”

He adds: “My point is that regardless of the EU referendum outcome, property will remain a strong investment over the long-term and it should not stop people from positioning themselves to take advantage of that fact.”

Additionally, many landlords are considering forming limited companies to avoid the gradual reduction in mortgage interest tax relief, from April 2017.

The latest data from mortgage lender Foundation Home Loans claims that landlords will favour limited company mortgages in the future, as this type of property business will be exempt from the cut in how much tax relief landlords can claim against mortgage interest payments.

Mahoney comments: “We have been advising on and forming limited companies for many of our clients, given the recent tax changes. When running the numbers and accounting for a slightly higher interest rate payable for limited company buy-to-let mortgages, we find that it is certainly worth considering for anyone on the highest tax rate with mortgage loan-to-values above 50%. This affects anyone earning over £43,000 per annum currently and £45,000 as of next year. Those that are borderline on the threshold need also be careful, as if they are landlords receiving rental income, the recent changes may push them above the bracket. It is very important to seek tax advice on this matter and if they haven’t already, all landlords and prospective landlords should be getting personal advice.”

If you are thinking of investing in the buy-to-let sector, or are considering changing your business model, remember to seek professional advice from a leading expert.

Rogue landlord and letting agent prosecuted

Published On: May 17, 2016 at 1:43 pm

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Today has seen reports of two more rogues in the buy-to-let sector brought to justice.

Firstly, a letting agent from Oxfordshire was ordered to pay £3,500 alongside costs of £2,700 for letting a HMO in excess of licensed number of people that it was able to hold. In addition, the property was in serious disrepair.

Failings

Mr Carl Afialka, of Bicester, runs Christopher Stanley Letting Agents and manages a HMO in Oxford, which council officers found to be in breach of housing lows.

When officers inspected the property, which was licensed for five people, they were alarmed to found 11 inhabitants. These included a family with two young children living in one room!

In addition, the officers found that a number of HMO licence conditions had not been met. The bathroom had serious damp problems, which in turned led to a build up of mould that couldn’t be cleaned. What’s more, the window frames of the property were rotten, the back door was insecure and the garden was littered with rubbish.

After initially pleading not guilty to the charges at an earlier hearing, Mr Afilaka failed to attend his second hearing earlier this month. As a result, magistrates chose to proceed with the case and he was subsequently found guilty.

Rogue landlord and letting agent prosecuted

Rogue landlord and letting agent prosecuted

Hefty punishment

Meanwhile, a landlord from East London was ordered to pay a whopping £100,000 after developing illegal flats at her property.

At her hearing at Snaresbrook Crown Court, Jaghtar Khaira of Elm Park was told to pay £88,500 after failings under the Proceeds of Crime Act. In addition, she was fined £2,500 for a second offence of failing to comply with an Enforcement Notice and an additional £10,300 in prosecution costs.

Khaira was granted planning permission to construct two flats at her property, but decided to develop four units for rent. This in turn resulted in a Planning Enforcement Notice being issued in 2011. As a result, Khaira was prosecuted and fined at Romford Magistrates Court in 2013. Despite this, she continued to rent out the two extra flats.

After the second prosecution, which resulted in a fine of £101,300, Mr Patrick Keyes, head of regulatory services at Havering Council said:

‘Throughout this investigation we have advised Mrs Khaira how she should comply but she continued to breach the Enforcement Notices and prosecution become the Councils only option.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/landlord-hit-with-100k-fine-for-building-illegal

 

 

Trends of a typical buy-to-let landlord revealed

Published On: May 15, 2016 at 10:04 am

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A revealing new survey has given an interesting insight into the assets and turnover of the typical buy-to-let landlord. The investigation also assesses how confidence is changing in the sector.

Trends

Data from the analysis by BDRC Continental suggests the average British landlord has a portfolio of eight buy-to-let properties. These are likely to be a mix of both terraces and flats, with a total value of around £1.3m.

This portfolio generates a yearly cross income of around £57,000.

What’s more, the report shows that typical residential landlords have an average of 6.3 loans, with their purchases funded by buy-to-let mortgages.

However, the report also indicates that confidence amongst buy-to-let landlords is at its lowest since the research began in 2006.

Mark Long, Director of BDRC Continental, notes, ‘there are few happy ever after tales here. Many private landlords in Britain are really concerned about the impact of the 2015 Budget when tax relief on private rental properties was cut and given the housing shortage, the potential knock-on effect on renters and the supply of rental homes is something that we all need to care about.’ [1]

Lack Of Confidence

59% of landlords are of the opinion that the measures announced in the Budget will lead to the profitability being negatively affected.

81% of landlords with more than 20 properties were found to be twice as likely as those with a single property to experience a slide in profitability. Of those with one property, 38% said they thought their profits would be hit, in comparison to 53% of landlords with 2-4 properties.

For landlords with between 5-10 properties, 68% were fearful of a profit slide.

Of those with a buy-to-let mortgage, only 39% said that they feel their short-term prospects are either good or very good.

Long observes, ‘the perceived impact of the Budget has softened slightly amongst some landlords, but amongst our respondents we saw some very strange feelings of disappointment and anger.’[1]

Trends of a typical buy-to-let landlord revealed

Trends of a typical buy-to-let landlord revealed

Incorporation incentive

The research also suggested that 33% of landlords are seriously considering converting their investment into a LTD company. This figure has dropped slightly from the 41% recorded in the final quarter of 2015, explained by 7% of landlords already operating as a limited business.

Despite landlord confidence dropping, tenant demand shows no sign of abating. 39% of landlords recorded increased demand in their area. Landlords with mid-large properties are more positive, with 45% reporting more demand.

In the face of the perceived negativity, 72% of private landlords believe that investing in and renting property is more profitable than other investment types.

Mr Long concluded by saying, ‘more Britons rely on the private rental sector-both the private landlords who invest in property and rent it out and the millions of people who call those properties home. With almost a decade of data on the sector and 36,000 interviews, we can identify trends and its clear that the current sentiment among private landlords is very low. Today’s industry event is about understanding the market, discussing the challenges and debating the future, based on the solid foundation of the view for this sector of the housing market from the grass roots up.’[1]

[1] http://www.propertyreporter.co.uk/landlords/is-confidence-still-low-amongst-britain%C3%A3%C2%A2%C3%A2%E2%80%9E%C2%A2s-private-landlords.html