Posts with tag: mortgage interest tax relief

Number of Landlords in Mortgage Arrears at Two-Year High

Published On: January 5, 2017 at 9:25 am

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The number of buy-to-let landlords in mortgage arrears has hit a two-year high, according to new figures from the Council of Mortgage Lenders (CML).

Number of Landlords in Mortgage Arrears at Two-Year High

Number of Landlords in Mortgage Arrears at Two-Year High

Mortgage arrears among landlords rose by 6% – from 4,700 to 5,000 – between July and September last year. This was the first increase seen since records began two years ago.

Following a rush of buy-to-let activity early last year ahead of the introduction of the 3% Stamp Duty surcharge in April, fewer investors are now adding to their property portfolios.

But some experts fear that many landlords, especially those entering the buy-to-let sector for the first time, acted too hastily in acquiring property that they could not afford to avoid being hit by the higher tax on additional homes.

The Chief Executive of the National Landlords Association (NLA), Richard Lambert, believes: “Some first time landlords may have rushed in to the market ill-prepared to beat the Stamp Duty hike. Unless landlords begin to make plans to mitigate the impact of these changes, it’s likely that buy-to-let mortgage arrears will continue to rise.”

The increase in the number of landlords falling into mortgage arrears has led to concerns that thousands more investors could get into debt when they are hit by further tax changes in April this year.

The existing rules that allow landlords to offset all of their finance costs against tax will, from 6th April 2017, be phased out under Section 24 of the Finance Act 2016, restricting the amount of tax relief that landlords can claim on mortgage interest.

The NLA estimates that around 440,000 basic rate tax payers will be forced into the higher tax bracket from April, once the changes come into force.

By April 2020, when the change is fully implemented, the consequences of Section 24 will mean that it is likely that higher rate tax payers will only receive 50% of the relief they currently get, with various experts warning that landlords will be left with little alternative but to pass higher costs onto tenants.

And with the forthcoming ban on letting agent fees for tenants, it’s highly likely that landlords will be forced to put their rents up considerably, leaving many tenants struggling to afford a home.

Almost Half of Landlords Would Stop Using Letting Agents if Profits Fell

Published On: December 14, 2016 at 9:35 am

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Almost half of UK landlords would stop using their letting agents if their profits fell as a result of forthcoming tax changes, according to the UK Association of Letting Agents (UKALA).

The study was conducted to assess what impact the reduction in mortgage interest tax relief could have on letting agents when it is gradually introduced from April next year.

Almost Half of Landlords Would Stop Using Letting Agents if Profits Fell

Almost Half of Landlords Would Stop Using Letting Agents if Profits Fell

Almost Half of Landlords Would Stop Using Letting Agents if Profits Fell

The news arrives as yet another blow to agents across the country, following the recently announced ban on tenant fees, which is likely to increase charges for landlords so that agents can cover their costs.

Overall, 57% of landlords – around 1.1m – say they employ the services of a letting agent, with 36% being regular users and 21% occasional users.

Regionally, more landlords in Scotland would stop using their agent if their profits fell than anywhere else in the UK. Contrastingly, just one in three landlords in the West Midlands would ditch their agent – the lowest number in the UK.

The study also revealed that a quarter of landlords who use letting agents to exclusively manage all of their properties would forego their services in the face of declining profits. This drops to a fifth of landlords who use agents on a let-only basis.

A third of landlords would retain the services of their agent, even if their profits were compromised.

The Executive Director of the UKALA, Richard Price, says: “A significant number of landlords will be hit hard by the tax changes and agents’ fees will be one of the items underneath the magnifying glass if profits begin to decrease.

“As landlords’ costs inevitably rise, agents will need to do more to position themselves as indispensible, and make it obvious that they provide solid value for money. Otherwise, as future tenancies come to an end, landlords will either shop around or start to consider self-managing their properties.”

Richard Lambert, the Chief Executive of the NLA, also comments: “Landlords should already be looking ahead to the forthcoming tax changes and working out how they will be able to maintain profitability. That will intensify with the prospect of agents’ fees increasing as a result of the ban on charging tenants.

“However, while it may seem an appealing proposition to minimise your outgoings, the majority of landlords simply won’t have the resources to deliver a service that meets the standards of professionalism that their agent currently provides.”

Would you stop using a letting agents if your profits dropped?

Homeowners More than Twice as Likely to be in Arrears than Landlords

Published On: December 1, 2016 at 11:25 am

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UK homeowners are more than twice as likely to be in mortgage arrears than landlords, according to Computershare Loan Services.

Homeowners More than Twice as Likely to be in Arrears than Landlords

Homeowners More than Twice as Likely to be in Arrears than Landlords

The firm, which manages over half of all outsourced mortgages in the country, has found that just one in every 166 buy-to-let mortgages (0.6%) are currently in arrears by at least one month, compared to one in every 73 homeowner loans (1.37%).

Computershare’s figures also show a significant regional disparity, with Welsh buy-to-let mortgages almost ten times more likely to be in arrears than those in the East Midlands.

Residential loans in London are more than twice as likely to be in arrears than those in the South West.

The latest House Price Index from Nationwide shows that 90% of mortgages contracted in the past 12 months were on a fixed rate, due to historically low interest rates.

The CEO of Computershare Loan Services, Andrew Jones, comments: “When mortgages fall into arrears, problems can arise for borrowers, lenders and tenants, so loans must be administered in a way that takes into consideration the individual circumstances of every customer.

“Computershare Loan Services continues to lead the way in preventing and reducing arrears by using advanced analytical systems to predict problems and facilitating support for those who need it.

“For over a quarter of a century, we’ve done everything we can on behalf of clients to work with borrowers, particularly those significantly behind on their payments, to find a solution that takes into consideration their circumstances.”

The firm currently services over £71 billion in mortgages and loans, which represents over half of the outsourced mortgages in the UK.

It’s good news for landlords, who appear to be on top of their mortgage payments. However, many will be apprehending the forthcoming reduction in tax relief on finance costs, which will be gradually introduced from 6th April 2017 and will affect around one in five investors.

The Government has provided a guide on how the change will affect you: /government-guide-tax-relief-changes-residential-landlords/

Guides for Landlords on Limited Companies a “Great Success”

Published On: November 29, 2016 at 9:59 am

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Foundation Home Loans’ guides for landlords on setting up limited companies to hold their property investments have been hailed a “great success”.

Guides for Landlords on Limited Companies a "Great Success"

Guides for Landlords on Limited Companies a “Great Success”

The specialist buy-to-let lender, which helped to pioneer the use of limited companies in the buy-to-let sector, has been delighted with the response to their guides from landlords and their advisers.

The guides for landlords, which are freely available on the firm’s website, explain the ease of setting up a limited company, what is required to run one, and how to close one down.

Quarterly data from one of the UK’s leading specialist brokers, Mortgages for Business, shows that limited company structures for buy-to-let accounted for 63% of all purchases. The move to this vehicle arrives on the back of tax changes from the Treasury, announced in July 2015.

According to Foundation Home Loans’ Business Development Director, Paul Brett, the guides have been created to show advisers and landlords that a limited company can be set up in 15 minutes or less and will help to beat the damaging tax changes.

From April next year, the amount of tax relief that landlords can claim on mortgage interest and other finance costs will be restricted to the basic rate of tax. The Government has created its own guide on how the change will affect you: /government-guide-tax-relief-changes-residential-landlords/

Be aware that the change will be gradually introduced, and will be fully operational in April 2020.

Brett says: “Clearly, our guides have had a very enthusiastic reception. They were developed to help advisers and landlords understand that the limited company route is not difficult.

“Since the Treasury’s announcement of tax relief changes, we have worked tirelessly to ensure that introducers, their clients, and the wider market can be confident and benefit from using a limited company as a positive and legitimate means of managing their properties in the most tax efficient way.”

How many landlords are thinking of setting up limited companies due to the tax change? These guides may be able to help!

Remember that we provide exclusive guides for landlords on the many legal obligations and responsibilities that you have when renting out property: /guides/

The Chancellor Missed an Opportunity in the Autumn Statement, Insists the SLC

Published On: November 28, 2016 at 9:27 am

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The Society of Licensed Conveyancers (SLC) has offered a mixed reaction to the measures announced in last week’s Autumn Statement, which was delivered by Chancellor Philip Hammond.

The Chancellor Missed an Opportunity in the Autumn Statement, Insists the SLC

The Chancellor Missed an Opportunity in the Autumn Statement, Insists the SLC

Firstly, the SLC welcomed the news that the Land Registry will remain in public ownership, which the society has lobbied for over several years. It claims that this will take away any uncertainty for the CEO of the Land Registry, Graham Farrant, and his team, so that they can concentrate on increasing the coverage of the register and eliminating the backlogs in first registrations and more complex transactions.

However, the SLC was disappointed that the Chancellor did not take the opportunity to reverse the “very damaging reforms” brought in by his predecessor, George Osborne, on private landlords.

The increased Stamp Duty obligation and reduction in mortgage interest tax relief will not only increase rents for tenants, particularly at the lower end of the market, warns the SLC, but will also contribute to a slowdown in the housing market in terms of transaction levels.

The Chairman of the SLC, Simon Law, responds to the Autumn Statement: “We are delighted that the Land Registry is going to remain in public ownership and we look forward to working with their executive in a number of areas that should improve the overall home buying and selling experience for consumers.

“We are less than happy, however, that the Chancellor has not heeded calls to reverse the very damaging attack made by George Osborne on private sector landlords. The level of housing market transactions will be adversely impacted in a way that is damaging to the economy, and will ultimately put up rents for hard-pressed tenants.”

In addition, the SLC is not convinced of the benefits of the Chancellor’s plan to ban letting agent fees for tenants.

“At the end of the day, these charges will end up being paid by tenants in rent and will thus be less transparent than when applied directly,” Law believes. “It will be more difficult to identify the behaviour of rogue agents.”

Do you believe that the letting agent fee ban will have a detrimental effect on the private rental sector?

Landlords seeing the Autumn Statement as a missed opportunity

Published On: November 24, 2016 at 10:06 am

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Yesterday saw the controversial, packed and as it turns out, final Autumn Statement delivered by Chancellor Philip Hammond.

During his address, Mr Hammond outlined plans to ban letting agent fees in the very near future. This has understandably left many landlords upset, with them now left to fit the bill for these charges.

Missed Opportunity

In fact, many buy-to-let landlords have been left disappointed, considering the Statement as a missed opportunity, to back those investing in the sector. Failure to alter stamp duty rates, or abolish proposed changes to mortgage interest tax relief have been highlighted as two missed chances.

Stamp Duty reforms announced by previous Chancellor George Osborne have moved to slow the housing market and has only raised half as much money as the Treasury forecasted.

The Exchequer has received £370m less in Stamp Duty than the £700m it expected, analysis has revealed.

Figures compiled by the Council of Mortgage Lenders indicate that the total amount borrowed by buy-to-let landlords slipped on an annual basis. The total dropped by 22% year-on-year to £2.8bn in September, with loans also down by 6% to 18,200. This shows a decline of 26% on the same period in 2015.

Anthony Hesse, managing director at Property Personnel, said: ‘Slashing the rate of stamp duty would have been Philip Hammond’s single most effective fix for UK finances. There is no more economically stimulating activity than house sales and purchases-so it would have been a tax cut that would largely have paid for itself. As a result, the continued stifling of the market is a missed opportunity for both the estate agency sector and the country.’[1]

Landlords seeing the Autumn Statement as a missed opportunity

Landlords seeing the Autumn Statement as a missed opportunity

Tax alterations

According to the National Landlords Association, 440,000 basic-rate tax payers will be driven into a higher tax bracket from April 2017. This is due to changes to mortgage interest tax relief, which will restrict the amount of mortgage interest landlords can offset against tax.

By April 2020, when the measures have been fully withdrawn, it is feared that higher-rate tax payers will only get 50% of their current relief. The worry is that these additional charges will be passed down to tenants.

Richard Lambert, chief executive officer at the National Landlords Association, observed: ‘This policy will push 44% of basic rate tax-paying landlords into a higher bracket, forcing them to either sell up and end perfectly happy tenancies, or increase rents.’[2]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/autumn-statement-missed-opportunity-to-support-buy-to-let-landlords