Posts with tag: Buy-to-Let

Buy-to-let sector ‘let off’ by BoE proposals

Published On: March 31, 2016 at 10:40 am

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Despite widespread criticism from many letting industry peers, the recently announced buy-to-let lending clampdown has been played down by one observer.

Nils Pratley, financial editor of The Guardian, feels that the buy-to-let sector has actually been, ‘let off the hook,’ by the Bank of England’s proposals.

‘Hardly onerous’

Mr Pratley feels the Prudential Regulation Authority’s call to increase stress tests on landlords is actually a good move.

‘In reality, those stricter standards are merely sensible ones that most lenders have adopted already,’ Pratley argues. ‘The Bank is only talking about testing a borrower’s ability to pay an interest rate of 5.5% when all tax liabilities are properly taken into account. That’s hardly onerous when fixed-rate deals in the buy-to-let market are generally pitched around the 3.5% mark.’[1]

The PRA assessed 31 major lenders in the industry, of which three-quarters already meet the new standards set out by the authority. Five out of twenty lenders however use a stressed rate of 5.47% of lower, lower than the level set.

Buy-to-let sector 'let off' by BoE proposals

Buy-to-let sector ‘let off’ by BoE proposals

Unconvincing

Pratley however is unconvinced, saying, ‘would-be landlords-or at least, those who weren’t planning to perform advanced gymnastics with their personal finances-will not tremble. All that will happen is that some banks will have to apply slightly stricter lending standards.’[1]

Concluding, Mr Prately said that he perceives there is still a possible threat to the wider economy. He attributes this to the volatile nature of the buy-to-let market.

‘With buy-to-let lending already close to 2007 levels as a share of the overall mortgage market, the Bank had room to be bolder, for example by placing caps on loan-to-value ratios. Instead, it has reached for one of the smallest tools in its new kit-bag. It may be a case of too little, too late,’ he noted.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/3/newspaper-argues-buy-to-let-is-off-the-hook-despite-mortgage-clampdown

 

Virgin Money updates buy-to-let mortgage range

Published On: March 31, 2016 at 9:23 am

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Today has started with Virgin Money announcing rate cuts throughout its core residential and buy-to-let mortgage range.

In addition, the lender has also raised cashback on buy-to-let intermediary exclusives, from £500 to £750, but only for a limited period. However, cashback totalling £1,500 remains available on all buy-to-let Stamp Duty Buster products.

New range

Intermediary exclusive products are able to be taken out through all intermediaries registered with Virgin Money.

Some key changes to the buy-to-let product range include:

  • Three-year fixed rate at 75% LTV, available at 3.74%-£995 product fee, £500 cashback
  • Five-year fixed rate at 75% LTV, available at 3.69%-£1,995 product fee. £500 cashback
  • Five-year fixed rate at 75% LTV, available at 3.79%-£995 product fee, £500 cashback
Virgin Money updates buy-to-let mortgage range

Virgin Money updates buy-to-let mortgage range

Enhancements

Peter Rogerson, Commercial Director for Mortgages at Virgin Money, noted, ‘these latest enhancements to our mortgage range demonstrate our continuing support to both residential borrowers and landlords. We have recently been named as best buy-to-let provider in the Moneyfacts Business Awards and to celebrate this success we are reintroducing £750 cashback on buy-to-let intermediary exclusives for a limited period only.’[1]

[1] http://www.propertyreporter.co.uk/finance/btl-rates-upd4ted-at-virgin.html

 

 

Where will increases in Stamp Duty be felt most?

Published On: March 30, 2016 at 1:00 pm

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An interesting new study on the potential financial impact of the additional 3% Stamp Duty Land Tax on landlords has been conducted.

With the changes coming into force on Friday, the research from LendInvest provides interesting information for landlords.

Charges

The study shows that 13% of landlords in England will pay stamp duty for the first time after Friday. Property prices in 14 out of 105 postcode areas average at £125,000 or less. This means that future buy-to-let purchases will be subject to up to £3,750 in Stamp Duty Land Tax.

LendInvest’s research revealed that Darlington, Halifax and Doncaster will be among the most badly affected regions for first-time stamp duty payments. This is due to the fact that they contain the most properties that will be subjected to stamp duty charges for initial payers, but also as they contain lowest average rents.

86% of those subjected to stamp duty payments for the first time will be in the Northeast or the Northwest. 12 out of the 14 postcode regions where house prices are under £125,000 are in these regions.

Where will increases in Stamp Duty Land Tax be felt most?

Where will increases in Stamp Duty Land Tax be felt most?

Capital pains

Outer London landlords will be bracing themselves, with the research showing that they will see the greatest increase in stamp duty payments due. Locations such as Tunbridge Wells, Dartford and Romford will see Stamp Duty Land Tax rise more than 300%, in comparison to 200% in Inner London.

If the estimates in the study are correct, landlords in the capital and in the Southeast will need the longest to repay greater stamp duty charges.

Bad news

Christian Faes, CEO of LendInvest, noted, ‘the stamp duty hike spells bad news for landlords-and their tenants. Put simply: when taxes rise, someone has to pay. Our latest BTL Index shows that the likely payer is ultimately going to be the tenant, with higher rents. The Stamp Duty Land Tax hike will cause rental yields to fall for landlords, putting pressure on them to raise the rents they charge.’[1]

Faes went on to say that, ‘it’s not just in Inner London where landlords’ taxes will soar, that we can expect to see landlords and tenants squeezed financially. The Index shows that all across England and Wales, we will see many landlords factoring several thousands of pounds of stamp duty tax into their budgets for the first time. Towns like Sunderland, Blackburn, Wigan and Oldham could be particularly badly impacted: here, rental yields are comparatively good but average house prices are below £125,000 meaning SDLT will be imposed for the first time.’[1]

Concluding, Mr Faes said, ‘the Treasury’s decision to inflict this tax hike is part of their longer term plan to professionalise the buy-to-let market and make Britain a country of homeowners. While the mission has its merits, there are no quick fixes to the nationwide housing crisis. Until there are more houses on the streets that people can buy at reasonable prices, landlords have their place and their tenants must be protected.’[1]

[1] http://www.propertyreporter.co.uk/hero/stamp-duty-blackspot-areas-revealed.html

Six in seven landlords undeterred by SDLT changes

Published On: March 30, 2016 at 10:39 am

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Categories: Landlord News

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Fresh research from the Nottingham Building Society has revealed that the changes in stamp duty rules coming into effect on Friday has failed to deter the majority of investors.

Data from the report shows that just one in seven existing and would-be landlords have shelved plans to add to or make an initial investment property purchase.

Increases in Stamp Duty

The study indicates 14% of existing and potential landlords have now decided against adding or starting their portfolio as a direct result of the changes. Nationally, interest in investment properties remains strong, in the face of fears that the alterations and spiralling costs of buying would curb investors’ enthusiasm.

Further analysis shows 78% of respondents said they would consider investing in property as part of their retirement plans.

Over the last three months, brokers have reported a surge in interest from would-be landlords looking to invest before the 3% increase in stamp duty charges. 35% of brokers said they had seen a marked increase in inquiries from potential buy-to-let customers over the period.

One in seven landlords undeterred by stamp duty land tax changes

One in seven landlords undeterred by stamp duty land tax changes

Strong

Ian Gibbons, Senior Mortgage Broking Manager the Nottingham Mortgage Services, noted, ‘the buy-to-let market remains strong despite a period of uncertainty as lenders and customers assess their options ahead of stamp duty and tax changes.’[1]

‘People should only invest in buy-to-let if they can afford to it and makes financial sense for them. But that said it clear that demand for property investment is not going away any time soon with the research showing people still very much value property as part of retirement planning. The tax and stamp duty changes are complicating the calculations on buy-to-let but given the risks of stock market investment and the low interest rates there is a strong case,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/78-of-landlords-refuse-to-be-stopped-by-stamp-duty-changes.html

Clampdown on BTL lenders could harm supply

Published On: March 30, 2016 at 9:21 am

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Categories: Landlord News

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Yesterday saw the Bank of England’s Prudential Regulation Authority recommend that lenders are subject to stricter conditions, in a bid to reduce borrowing to buy-to-let purchasers.

However, the Residential Landlords Association (RLA) believe that these proposals from the Bank are premature.

Tests

The Prudential Regulation Authority  (PRA) says that individual lenders should ramp up so called ‘stress tests’ on borrowers. This is to ensure that they could cover interest payments, should rates rise to 5.5% for five years.

Whilst agreeing that no landlord should take on a debt that they cannot afford to repay, the RLA has called the proposals premature. This, it claims, is due to the introduction of the stamp duty surcharge and mortgage interest tax relief.

David Smith, Policy Director at the RLA, said, ‘the Bank needs to be careful that it does not over-react to the current surge in buy-to-let applications which are aiming to beat the tax increases coming in April.’ He feels, ‘it is likely that the impact of these will significantly reduce the demand for borrowing. We would urge the Bank to tread carefully and avoid any premature moves that could stifle the supply of the one million rental properties the country desperately needs.’[1]

Clampdown on BTL lenders could harm supply

Clampdown on BTL lenders could harm supply

Reductions

The PRA’s proposal, if rubber-stamped by the full Bank of England, could see a reduction in buy-to-let approvals by up to 20% by 2019. If constraints are not put in place, the authority says that borrowers predicted an increase of 20% during the same period.

31 major lenders in the industry were assessed by the PRA, representative of 90% of buy-to-let lending in Britain.

Over three-quarters were found to meet the new standards, but five of the twenty largest lenders currently utilise a’stressed interest rate,’ of 5.47%.

Concerns on buy-to-let lending were also highlighted by the Bank of England’s Financial Policy Committee in minutes from their last meeting:

‘Macro-prudential risks centre on the possibility that buy-to-let investors could behave pro-cyclically, amplifying cycles in the housing market, as well as affecting the resilience of the banking system and its capacity to sustain lending to the wider real economy in a stress.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/3/mortgage-clampdown-could-stifle-lettings-supply-warns-industry-body

 

Huge fines for landlords after illegal letting

Published On: March 29, 2016 at 12:01 pm

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A pair of buy-to-let investors who flaunted planning regulations have been told to pay a total of £116,000.

Efstratios Filis-Gelagotis and Andreas Charalambous converted a property into seven studio flats in the London borough of Islington. This conversion was carried out without the required planning permission.

Warning

In December 2013, Islington Council issued a planning enforcement notice, permitting the unauthorised use of the single-family property for studio flats to cease inside six months.

Despite this, the flats continued to be let without authority, even after several further warning letters were issued by the council. As such, a decision was taken to prosecute the two men.

In October last year, both Filis-Gelagotis and Charalambous pleaded guilty to failure to comply with the enforcement notices.

Huge fines for landlords after illegal letting

Huge fines for landlords after illegal letting

Fines

Blackfriars Crown Court has instructed both men to pay a fine of £5,000 each, alongside legal costs of £4,000. In addition, they were each ordered to pay another £49,000 under the Proceeds of Crime Act. This money represents the value made from renting the property between July 2014 and October 2015.

Since the trial, the property has now been legally converted into a six-bedroom house in multiple occupancy (HMO.) Planning permission was granted in October of last year.