Posts with tag: Buy-to-Let

Deputy BoE governor concerned over BTL lending

Published On: May 5, 2016 at 9:16 am

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With buy-to-let investment continuing to move at a steady pace, despite the Government’s moves to cool interest, the Bank of England’s deputy governor has moved to express his concerns.

Low-cost, interest only mortgages and substantial rental yields continue to drive momentum for investors. However, Sir Jon Cunliffe is worried about the pace at which the sector is growing.

Concern

The deputy governor also said he was concerned about mortgage lenders over-exposing themselves to buy-to-let, lending money more freely as a result.

Since 2008, buy-to-let lending has increased by an average of 6%. Cunliffe pointed out that buy-to-let lending to landlords now makes up more than 15% of all mortgages, up from 8.5% in 2007.

As mortgage lending in the sector grows, Cunliffe feels it is important to look carefully at whether lenders’ underwriting procedures are falling.

He observed, ‘at around the start of 2016, lenders were planning to grow their gross buy-to-let lending by, on average, almost 20% per annum over the next two years, with some challenging banks and smaller building societies planning to grow their buy-to-let books at a much faster rate.’[1]

‘When some form of credit is growing fast one needs to look very carefully at whether lenders’ underwriting standards are slipping,’ he added.[1]

Deputy BoE governor concerned over BTL lending

Deputy BoE governor concerned over BTL lending

Tighter

In March, the Bank of England announced plans to introduce more tighter checks on buy-to-let lenders. The Bank’s Prudential Regulation Authority (PRA) said that it was announcing the moves to stop banks from making risky loans. It warned that 20% of lenders were guilty of not making sufficient credit checks.

Its main concern was that a housing bubble could be created, which in turn would cause a wider housing market slowdown. Over 1.7million properties now have buy-to-let mortgages, representing 17% of loans used to purchase property in the last year.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/major-concern-over-surge-in-buy-to-let-mortgages

High demand and low supply to drive rents up

Published On: May 4, 2016 at 8:57 am

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A director of leading letting agents in Britain has warned that rents will continue to increase over the coming months.

Adrian Gill, director of Your Move and Reeds Rains, feels that there will be a cut in housing supply in the private rental sector, with many buy-to-let landlords leaving the market.

Alterations

According to Gill, the recent tax changes, including the additional stamp duty charges, is driving many residential landlords out of the sector. This is turn is set to drive up an early chronic shortage of properties in many areas.

Mr Gill notes that, ‘ultimately, this will only punish tenants, driving out buy to let landlords will reduce supply leading to lower choice and higher rents for those that can least afford them.’

He went on to observe that Spring represents the calm before the summer storm, with demand for homes in the sector driven by a flow of jobs and a flux of a general more mobile workforce.

‘This reflects the strengths of private renting, the opportunity for young, independent adults to strike out on their own, or for families to move across the country and earn the best possible livelihood. In the towns and cities with the biggest renting populations it is a constant struggle for supply from landlords to match demand from tenants. With a surge in jobs and local economic activity, rents rise. Keeping pace will not be easy and will depend on the freedom to invest as a landlord,’ Gill added.[1]

High demand and low supply to drive rents up

High demand and low supply to drive rents up

Restraint

Just last week, a survey from the Association of Residential Letting Agents (ARLA) found that 65% of landlords will not look to purchase any more buy-to-let properties in light of the tax alterations.

61% of ARLA agents said that rents will rise even further as a result of the tax changes.

David Cox, director of ARLA, said, ‘whilst landlords adjust to the increase in costs we can expect to see one of three outcomes prevailing in the buy-to-let market: landlords absorbing the cost and taking the hit; landlords withdrawing from the market causing supply to fall; or landlords regaining those costs through hiking rents. Next month we can start to assess the damage.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/rents-set-to-rise-as-demand-grows-and-supply-falls

Buy-to-let lenders facing stricter criteria

Published On: May 3, 2016 at 9:27 am

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Mortgage lenders in Britain are widely expected to limit lending to buy-to-let borrowers, after a decision from the Mortgage Works that moved to restrict the amount landlords can borrow.

The Mortgage Works, a buy-to-let division of Nationwide, said last week that from 11th May, residential landlords will require to have substantially more rental income relative to the cost of their mortgage than is presently the case.

Stricter

The division has tightened its rental cover requirement, which is the amount a landlord is required to take in rent in comparison to the cost of their mortgage repayments. This figure has now risen to 145%, from 125% previously.

This alteration means that Nationwide will not lend to landlords with a 20% deposit and instead will only lend to those with a minimum 25%. The changes come in response to the Bank of England’s announcement in March that mortgage lenders could face stricter lending criteria when offering mortgages to buy-to-let landlords.

Experts have forecast that property investors will need to have a 40% deposit when looking to purchase property, as a result of the alterations.

Buy-to-let lenders facing stricter criteria

Buy-to-let lenders facing stricter criteria

Unsurprising

David Whittaker, managing director at broker Mortgages for Business, noted that he was not surprised to see lenders starting to increase cover ratios for borrowers. He said, ‘as one of the biggest mainstream buy-to-let providers, The Mortgage Works is taking the lead and demonstrating to the market and the regulators that it truly understands the forthcoming tax relief changes. It will be interesting to see how other providers react.’[1]

‘I anticipate a few will be making similar preparation, some will wait until the outcomes of CP11/16 (Recovery and Resolution Plans) are known and others will bury their heads in the sand. ICRs on products for limited companies will remain generally the same as they are now because these borrowing vehicles will not be subject to the new tax relief restrictions. Indeed, it will be the lenders with products in this category who will be the likely winners out of this in the long term,’ Whittaker continued.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/buy-to-let-lenders-to-face-tougher-checks

Agency cuts fees to 0.5% ahead of Brexit vote

Published On: April 27, 2016 at 2:02 pm

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A top City investment consultancy has said that one leading private agency chain has cut fees to 0.5%, ahead of the upcoming EU referendum.

Despite not revealing the name of the agency, Jeffries said that it had slashed fees in order to build up instructions before the vote in June.

Bullish

Jefferies made the reference to the unknown agency following the bullish trading statement released by Countrywide yesterday.

Countrywide stated that house sales were up by 30% during the first quarter of this year. This was not unique however, with many agents reporting similar rises, as investors rushed to beat the additional stamp duty deadline on April 1st.

In both Jeffries note to investment clients and in the Countrywide statement, concerns are raised about the economic impact of the Brexit vote.

Agency cuts fees to 0.5% ahead of Brexit vote

Agency cuts fees to 0.5% ahead of Brexit vote

Cuts

Anthony Codling, Jefferies’ analyst Anthony Codling noted, ‘price competition remains strong and we are aware that one of the private majors has been cutting fee rates to around 0.5% in order to firm up a pipeline ahead of the EU referendum.’[1]

Noting that Countrywides’ trading statement yesterday was shorter than in previous months, Mr Codling also said that this was a hint of falls in trade.

Codling observed, ‘we would not be surprised to learn that one of the reasons Countrywide has trimmed it’s trading update disclosures is to reduce the risks of analysts extrapolating Q1 performance across the full year. We did find the trading update somewhat brief and somewhat short on numbers, although Countrywide disclosures are in-line with their peers.’[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2016/4/major-agency-has-cut-fees-to-0-5-in-case-market-slumps–claim

 

Are Landlords Still Making Money from Buy-to-Let?

Published On: April 25, 2016 at 9:45 am

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Are Landlords Still Making Money from Buy-to-Let?

Are Landlords Still Making Money from Buy-to-Let?

Landlords have been hit by tax changes in recent months, with more planned for the future. As a result, just one in five believe that there is still money to be made from buy-to-let. So, are landlords still making money?

Research conducted by PropertyLetByUs.com – an online letting agent – shows that over half of landlords purchased buy-to-let property in the last three months to beat the 3% Stamp Duty surcharge, which came into effect on 1st April.

The study also found that 43% of landlords are thinking of turning their lettings businesses into limited companies to beat further tax rises next year. Recently, the Managing Director of the Association of Residential Letting Agents, David Cox, advised landlords to consider the benefits of doing so.

However, just 5% of landlords have sold their buy-to-let properties due to the tax changes, and only 6% plan to reduce their property portfolio and invest in stocks and shares.

Despite many stories of the death of buy-to-let, just one in six landlords have seen a reduction in their profits. Additionally, Nova Financial’s Paul Mahoney insists that buy-to-let is not dead: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

The Managing Director of PropertyLetByUs.com, Jane Morris, says: “Our research shows that landlords are fairly upbeat about the buy-to-let market and many of them appear to have strategies in place to offset the tax hikes. Many landlords are opting for incorporation at the same time as raising rents.”

Indeed, rents have increased by 3% over the past year, and the majority of landlords are planning to put their rent prices up in the future.

Morris continues: “The surge in landlords investing in buy-to-let property in the first quarter of 2016 has created a bubble of new rental properties in some parts of the UK. However, in the longer term, it is likely that the tax changes will limit the supply of rental property and discourage potential new landlords from investing in the buy-to-let market. The good news is that tenant demand will continue to rise, as unaffordable house prices push home owning out of reach for many people.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Top insurance claim reasons revealed

Published On: April 24, 2016 at 9:23 am

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Research conducted by Simple Landlords Insurance has revealed the top reasons why buy-to-let landlords make insurance claims.

Analysis of 100,000 buy to let insurance policies indicates storm damage, burst pipes and break-in damages are the biggest reasons why claims are made by investors.

Damages

The investigation found that storm damage is the most common claim, costing an average of £1,500 to repair. Damage to ceilings, walls and carpets caused by cracked pipes came next, with an average repair bill of £4,500. The third biggest reason for claiming was damage caused by burglars, amounting to average bills of £2,300.

Of the top-ten most common reasons, the most expensive was repairs to cover the costs of electrical fire damage, which averaged £25,000.

Simple Landlords spokesman Andrew Watson said, ‘saving money will become even more important for landlords in coming years as tax increases announced by the Chancellor are phased in, which for many investors could make the difference between profit and loss.’[1]

Top insurance claim reasons revealed

Top insurance claim reasons revealed

Location, location, location

In addition, the report also shows how premiums vary substantially according to location, property type and tenant age. What’s more, agents and landlords are warned about damages that are not covered by  policies, with the most common reason being landlords not buying accidental damage cover.

Landlords should always check their landlord insurance policy to make sure they have the right cover for their needs.

‘Buying insurance is often one of the last things buy-to-let investors consider,’ Watson noted. ‘Having a clear understanding of the key factors that can influence a premium will save landlords money in the long run,’ he added.[2]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/4/storm-damage-broken-pipes-and-break-ins-top-lettings-insurance-claims

[2] http://www.propertywire.com/news/europe/storm-damage-and-burst-pipes-cause-the-most-damage-in-uk-buy-to-let-properties-2016041511799.html