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The main growth areas are specialist resi and buy-to-let

The main growth areas in the mortgage market are specialist residential and buy-to-let, Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, has argued.

Sedgwick said education is needed to help brokers understand specialist areas. Vida provides webinars, workshops and regional blogs by key account managers.

One area Vida has seen an uplift in is expat buy-to-let since the 2016 EU Referendum.

Sedgwick said: “Any growth in the market has to come from the specialist area and the more education there is, the greater the market will grow. We’re trying to find different ways of educating brokers.

“Before we voted to leave prices were more expensive and since the vote have dropped, making the property market more vulnerable.”

Payam Azadi, director of Niche advice, agreed and said he’d done more expat buy-to-let business this year than previous years.

He added: “As lenders start looking for more margin and diversifying their proposition, they’re going to be going into the more specialist sectors.

“We have seen a lot of lenders diversify firstly into specialist buy-to-let, for example, lending on houses in multiple occupation (HMOs) and expat buy-to-let, but there’s also other sectors lenders have moved into.

“There’s another batch of lenders looking to loosen criteria around adverse credit and others looking at affordability. There are a number of strategies from different lenders. It depends on how they’re funded and what the funders’ risk models are and what margin lenders have to give back to their funders.

“Within the specialist market margins are under pressure, so it’s great saying you’re going into this sector but it’s about how much money you can make there. You’ve seen lenders look at different areas to give edge over competition.”

By Michael Lloyd

Source: Mortgage Introducer

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Experts warn of further buy-to-let changes

Advisers and their landlord clients should not rule out further changes to the private rental sector, according to buy-to-let experts.

A panel at the financial services expo — made up of Adrian Moloney of OneSavings Bank, David Whittaker of Keystone Private Finance, and Steve Cox of Fleet Mortgages — said ongoing political uncertainty and the potential for a change of government could lead to more alterations for landlords, especially in regards to tax.

The panel, which was speaking last week (May 15) did not rule out the idea that a future government could further cut back mortgage interest tax relief for landlords.

Landlords have already seen the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016 and cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

Mr Moloney said: “I think it would be a very bold move because you’d have to start changing tax legislation potentially across other areas and I think HM Revenue and Customs is currently happy with the level of tax coming from buy-to-let landlords.

“But there is no way of knowing how another government could act.”

Mr Whittaker, agreed that a government of a different leaning to the current Conservative one could make changes to the tax system that would “create more waves and more damage”.

Labour’s Jeremy Corbyn for instance has long spoken of the need to fix the ‘broken’ housing market.

In January, the Intermediary Mortgage Lenders Association warned that landlords would start to feel the pinch of new regulation in their tax returns for the first time.

And the effects are already visible. UK Finance lending trends, published last week (May 16), showed that about 5,000 new buy-to-let purchase mortgages were completed in March — 9.1 per cent fewer than in the same month in 2018.

The panel was also asked about the recent government proposal to ban section 21 evictions.

Last month (April 15), the government proposed a consultation on abolishing the so-called ‘no fault’ section 21 notices, which give landlords the power to evict tenants at the end of their tenancy without a reason.

At the time, landlords warned there were dangers, such as a shortage of landlords and less competition for consumers, if the reforms were not carried out correctly.

Mr Whittaker said since the announcement, the government had accepted that in order to shake up how a section 21 order works, there had to be an improvement of the processes around section 8 notices — similar to a section 21 but where the landlord has to give a reason.

He said: “There has been a recognition that the government can’t get rid of the existing rules without having something in its place.

“The government appears to know that if they have a continuing lack of political appetite to run a social housing policy, let alone fund it, they can’t afford to mess up the private rental sector too much.”

Mr Whittaker went on to say that lenders were part of this debate as it would ultimately impact their landlord customers if they were unable to get possession of their property.

Mr Moloney added that until there was more certainty surrounding the buy-to-let market, lender and borrower activity would be impacted.

Mr Cox agreed that the government’s wider reliance on the private rental sector meant it had to reconsider such substantial changes.

He said: “I think the most important part is that the government, whether reluctantly or not, needs a buoyant and thriving rental sector because a social housing policy – or lack thereof – is not going to take care of the issue.”

By Imogen Tew

Source: FT Adviser

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Buy-to-let purchase loans in melt-down as landlords beat their retreat

The number of mortgage approvals for all types of house purchase has dropped sharply, with a drop of almost 10% in buy-to-let loans.

Approvals for home movers have slid 6% annually to 25,280, while approvals for first-time buyers have dropped for the first time in six months.

Data from banking trade body UK Finance shows there were 28,800 first-time buyer mortgages approved in March, down 2.4% annually, the first time this figure has dropped since last September.

Buy-to-let purchase mortgage approvals fell 9.1% during March.

In contrast, remortgage approvals in both the residential and buy-to-let sector increased.

Commenting on the figures, John Phillips, national operations director at Spicerhaart, said: “The purchasing market has been tough for some time now, and I don’t think it is going to get much better until the wider market forces change, and with no real idea what is going on with Brexit, it is hard to predict when that might happen.

“But with the ongoing threat of a rate rise on the cards, people will be fixing now to avoid any nasty surprises down the line, so this will account for some of the remortgaging rise.”

Paul Smith, chief executive of haart estate agents, said: “Evidently, the demand is there, but mortgage and transaction figures will not increase until we have the stock in the market to match it.”


Source: Property Industry Eye

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Older Generation Making More Buy To Let Property Investments

The older generation are making more buy to let property investments, as they look to supplement or even replace pensions.

According to new research from Commercial Trust, the older generation showed a notable rise in the number of buy to let mortgage applications in 2018.

Commercial Trust saw older borrowers aged between 65 and 75 increase their share of buy to let mortgage applications by 5.43 per cent in 2018, compared to just a 0.03 per cent rise for 25-34 year-olds.

The buy to let broker also reported a 4 per cent increase in the proportion of buy to let purchases and remortgages from over 55s, who now account for 39 per cent of all buy to let activity.

For purchase only applications, older investors over 55 were responsible for 29.7 per cent of all business in 2018, an annual increase of 8 per cent.

Older buy to let mortgage applicants are being encouraged by a number of lenders, who have increased the maximum age permitted at both application and at the end of the mortgage term.

Santander now cater for older investors by recently increasing their maximum age at the end of the mortgage term criteria from 75 to 85 years old and the maximum mortgage term on its buy to let range from 25 years to 40 years.

Precise now has a maximum application age of 80 on a maximum term of 35 years, while The Mortgage Works sets no maximum age at term end for experienced landlords.

Chief executive at Commercial Trust, Andrew Turner, said: ‘Our look at the age demographics for 2018 buy to let mortgage activity, suggests that increasing numbers of older people are recognising the potential of buy to let investments.

‘Our data indicates that many people reaching retirement are choosing to invest in bricks and mortar and the rental market as a means to fund their retirement years.

‘Investing in property has the potential to deliver attractive rental yields and achieve capital growth, despite industry changes. I fully expect that the returns fair better than many other forms of investment.’

Source: Residential Landlord

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Buy-to-let regulation blamed as landlord arrears increase

Buy-to-let mortgage arrears increased in the first quarter of 2019, prompting concerns that disgruntled tenants are stopping paying rent as a result of landlords giving them notice and exiting the sector.

The latest arrears and repossession data from UK Finance showed that while repossessions in the buy-to-let sector were down, there were 4,620 landlord mortgages in arrears of 2.5% or more of the outstanding balance in the first three months of 2019 – up 3% annually.

Within the total there were 1,200 buy-to-let mortgages with arrears representing 10% or more of the outstanding balance, up 12% on the previous year.

UK Finance has claimed this is not an increasing trend, but Mike Pilling, managing director of Spicerhaart Corporate Sales, warns that it could be a consequence of landlords leaving the buy-to-let sector amid tax and regulatory clampdowns.

He said: “As a result of recent regulatory changes, there are many private landlords looking to get out of the sector, and this rise could be down to the fact that some tenants who have been given notice are now not making their rent payments.”

The figures also show the level of home owner mortgage arrears fell 4%, but 1,380 properties were taken into possession in the first quarter of 2019, 10% higher than in the same quarter of the previous year.

UK Finance said this was due to a backlog of cases and is still well below the levels seen between 2009 and 2014.


Source: Property Industry Eye

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Number of landlords in arrears up 12%

The number of buy-to-let mortgage holders in significant arrears has increased by 12 per cent since last year, according to new data from UK Finance.

The trade body’s mortgage arrears and possessions update, published today (May 9), showed there were 1,200 buy-to-let mortgage properties in serious arrears — 10 per cent or more of the outstanding balance — in the first three months of 2019.

This was 12 per cent greater than in the same period in 2018.

The total number of buy-to-let mortgaged properties in any arrears, 2.5 per cent or more of the balance, increased by 3 per cent to 4,620 in Q1 2019.

The residential market fared better as the new data showed the number of homeowners in arrears remained at a historic low.

There were 76,580 homeowners in low level arrears in the first three months of 2019, down 4 per cent on the same period last year, and the number of consumers in serious arrears decreased by 3 per cent.

Arrears led to 1,380 residential properties and 570 buy-to-let mortgaged properties being repossessed in the quarter.

For the buy-to-let market, this meant repossessions fell by 14 per cent while for residential mortgages, the number of houses repossessed increased by 10 per cent.

UK Finance stated the increase in possession in the residential market had been driven in part by a backlog of historic cases and stressed that the total remained well below the levels seen between 2009 and 2014.

Commenting on today’s findings, Jonathan Harris, director of mortgage broker Anderson Harris, said: “Encouragingly, there has been a further fall in the number of homeowners in mortgage arrears, with numbers at historically low levels.

“The vast majority of borrowers are paying their mortgage in full and on time each month, perhaps not surprising when one considers how low interest rates are.”

But Mr Harris stressed there was no room for complacency in terms of mortgage repayments and said borrowers should plan ahead and consider how they would cope if interest rates were to rise.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Buy-to-let landlords are falling into arrears from the pressure of tax and regulatory changes, as we might have expected.

“These figures also show that there is little appetite among lenders to repossess because they are not going to do too much better than the owners themselves in achieving a sale at a reasonable price.”

According to Mark Pilling, managing director at Spicerhaart Corporate Sales, the increase in buy-to-let properties in arrears could be down to the fact that many private landlords were looking to get out of the sector as a result of regulatory change.

This rise, he said, could be down to the fact that some tenants who have been given notice are now not making their rent payments.

He added: “In terms of residential mortgages, arrears are down slightly but possessions are up by 10 per cent, a fairly significant increase. And while they are still not at the levels seen after the financial crisis, they are slowly creeping up.

“And I think we will now see these residential possession numbers continue to increase every quarter, ballooning at the end of the year as borrowers start to run out of options to get themselves out of difficulty. And while forbearance is still an option for some, lenders need to look at all the circumstances of each customer and get the right strategy in place.”

In January, the Intermediary Mortgage Lenders Association warned the introduction of various tax and regulatory changes since 2015 would begin to have an effect on property availability and tenant choice in the rental sector as landlords began to feel the pinch of new regulation.

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

By Imogen Tew

Source: FT Adviser

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Not all gloom for rental market

It has been widely reported in the media how Brexit uncertainty has slowed down both the buy-to-let and residential housing market.

However, closer examination suggests other factors may have as much or more influence on current market activity.

Undeniably there has been a slowdown in both residential and buy-to-let markets over the past 12 months.

UK Finance recently reported that while buy-to-let remortgage activity has soared, the total number of buy-to-let purchase completions in 2018 was 11.2 per cent less than in 2017.

Meanwhile, their figures for January 2019 showed a 1.5 per cent reduction in the volume of residential lending, compared to the start of 2018. Put simply, people were choosing to sit tight and rely on the private rental sector rather than buy their own homes.

Key Points

  • There has been a slowdown in the buy-to-let sector
  • There has been intervention by the government in the buy-to-let market
  • The number of buy-to-let products shows lenders are positive about the outlook

For many who are renting, the prospect of saving for a deposit remains an almighty challenge.

The Ministry of Housing, Communities and Local Government’s recently-released English Housing Survey for 2017-18, indicated that the private rental sector has remained unchanged for the past five years at 4.5m households, which equates to 19 per cent of the total.

The latest survey revealed that 58 per cent of renters expected to buy a property eventually, with 26 per cent anticipating this will happen within the next two years, while 41 per cent suggested it will take five years or more to accomplish this goal.

Those timescales suggest that Brexit is not a major consideration.

Meanwhile, landlords have been dealing with more immediate and tangible concerns.

The past three years have seen substantial government intervention in the buy-to-let market, with the introduction of stamp duty on additional properties and the reduction and gradual replacement of mortgage interest tax relief perhaps the biggest financial changes.

But factor in the new house in multiple occupation licensing laws and crackdowns on living standards, plus the imponderable consequences of the imminent tenant fees ban and it is easy to see why some landlords have decided to sell up or not invest.

In particular, it has been the smaller landlord, perhaps with less time to keep abreast of the changes or adapt their strategy, that has struggled with the changes.

Many landlords with larger portfolios may already operate with more organised strategies in place, particularly in light of the Prudential Regulation Authority changes that came into effect in October 2017.

These required a more rigorous approach to the underwriting of portfolio borrowing and resulted in such investors having to provide more detail at the application stage.

It is too simplistic to simply lay current property investment levels purely at the feet of Brexit. There are too many other elements at play.

Adopting a pragmatic approach to investment

There are still plenty of reasons why buy-to-let investments can offer opportunities to those looking for solid financial returns.

Firstly, depending largely on property location and type, many landlords continue to turn a profit, which currently outweighs those available from other types of investment.

Here are a few positive factors to consider if your clients are contemplating a buy-to-let investment:

• At the moment, there is a general sense of stagnation within the property market. This means that property prices are, in many areas, no longer accelerating at previous rates.

Consequently, there may be opportunities available on the market. If you come across a property that has historically been rented out, this might mean there is less work to do upon purchase to have it ready to let.

• Market sentiment, as highlighted by the government’s survey, suggests no reduction in demand for rental homes, as thousands put on hold their dreams of home ownership in favour of renting for the foreseeable future.

In February, London estate agent Foxtons reported that in 2018 there was an 8 per cent increase in renter registrations in London, compared to 2017.

• There are big regional disparities in buy-to-let performance – and landlords are not bound geographically by where they own property. Buy-to-let yields and capital growth prospects vary across the UK, with the North West and the Midlands figuring prominently in recent data.

Since June 2016, when the Brexit vote took place, 10 UK cities have achieved double-digit house price growth, with seven located in the north of England.

• While Brexit has arguably had a negative effect on London and the South East, so too has the price of property for would-be buyers and, likewise, rent for would-be tenants.

With government investment in infrastructure, in particular the Northern Powerhouse, businesses have relocated to other parts of the UK and workers have followed suit. That has helped to create vibrant micro-economies for buy-to-let.

• Historically, house prices have recovered from any short-term economic or political unrest and proved resilient in the face of the financial crisis of a decade ago. Investment in bricks and mortar should always be regarded as a long-term strategy, in this context, well beyond Brexit.

• The sheer volume of buy-to-let products in the market place (1,162 in late February 2019, according to Moneyfacts), reflects a positive buy-to-let outlook from lenders. But the choice also comes with all sorts of incentives and competitive mortgage rates.

The Bank of England base rate remains historically low and rates for five-year fixed rate buy-to-let mortgages, for example, are more than 2 per cent less than in 2010.

The big question is how long lenders can sustain these low mortgage rates? By delaying investment in buy-to-let, some borrowers could run the risk of missing out on the lowest deals, should rates rise in the future.

We live in extraordinary times and Brexit presents its own unique set of challenges, but should not be confused with wider property market issues.

Perhaps never before has there been as much need for a buoyant private rental sector that serves the country’s escalating needs.

With low interest rates, infrastructure investment and growing tenant demand, Brexit may not present as big a challenge as recent tax and legislative changes. But, with a sound and responsive investment plan in place, buy-to-let landlords can prosper and Brexit offers no reason why that should not continue.

By Andrew Turner, interim chief executive of Commercial Trust

Source: FT Adviser

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Limited company buy-to-let criteria is the battleground for lenders

Half a decade ago, there would have been few in the mortgage market who might have predicted limited company buy-to-let as one of the major growth areas in the years ahead. Without reckoning on some considerable government and regulatory intervention, how could they know?

But, that’s exactly what the buy-to-let sector and landlords have been subjected too, and while there appears to be no let up in that regard, the market has shifted to accommodate how landlords might wish to take their portfolios forward and how they can try and secure the mortgage interest tax relief which has been steadily cut for those holding properties in their own names.

While we might not have seen a big move of existing rental properties into limited company vehicles – blame the stamp duty increase for that – landlords are now much more likely to purchase new properties within a limited company vehicle, and because of this, even our very biggest buy-to-let lenders have needed to respond to the shifting nature of the sector.

Indeed, as time goes by, and landlords see how the ongoing cuts to mortgage interest tax relief impact on their profitability, you can’t help wondering if – even with the large stamp duty outlay – landlords might feel they need to bite the bullet and move existing properties (held in their individual names) into those limited companies.

I suspect that if these landlords are looking at holding these properties over the very long-term then a decision might be made to take the stamp duty hit now, rather than later when the property’s value might increase that payment. It is though a fine line to tread as a mortgage adviser and the last thing you should be doing is weighing into such a debate if you’re not also a specialist tax advisor.

Instead, if your client comes with you and wants to discuss this, and they have not already done so with their tax specialist and secured their advice, then you might want to curtail any conversation until they have done so. It may well be the right thing for the client to do but you don’t want to be the individual blamed for such ‘advice’ if its later found out not to be.

Overall, however, the growth in limited company business has come predominantly via new purchase activity and, as mentioned, there are now few buy-to-let lenders who are not offering products for this type of lending. Just last week the Saffron Building Society launched its limited company buy-to-let mortgage and while it perhaps won’t have the considerable impact that its mutual cousin, Nationwide, did when it moved into the sector, it is another potential product option for advisers with clients in this market.

Indeed, you might perhaps say that the limited company buy-to-let client is now incredibly well served in terms of product numbers, and the real battleground for lenders is around the criteria they offer to landlords. Pricing is competitive but what seasoned portfolio landlords are likely to want is a significant degree of flexibility in terms of the administration burden placed upon them in trying to secure a mortgage.

We’ve certainly seen a shift in this direction too, with a number of lenders not requiring business plans now or insisting on a complete run-down of every other property in the portfolio, when it is unrelated to the property which requires a mortgage. While the client’s existing portfolio should be understood, and I completely understand why lenders don’t want to be over-exposed to one landlord or indeed certain types of property, lenders might be historically viewed as over-sensitive in this area. Again, that appears to be changing as increased competition has made itself felt.

There is also an argument that we are at saturation point when it comes to buy-to-let propositions. I saw a recent roundtable of ostensibly bridging lenders who voiced a similar concern and appeared to be coming to the common-sense view that, while they might wish to be involved in the buy-to-let market, unless they could come to it without something new and unique, or they were willing to go incredibly high up the risk curve, there appeared little point in them moving in that direction.

Overall, however, when it comes to finance options, the market appears to be rosy for landlords. Wider problems around increased costs and decreased profitability might persist, but the tenant demand is there, and if they can get new property at the right price, in the right area, within the right tenant demographic, then buy-to-let remains a strong investment for them. And advisers will be fully in demand to work out the best finance to support their activities.

Source: Mortgage Introducer

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London Buy To Let Investment In Recovery

The London buy to let property market is showing signs of recovery according to the latest data released from buy to let finance broker Commercial Trust.

London buy to let took a bit of a battering over the last year, largely due to the uncertainty caused by the Brexit fiasco. However, positive signs have been seen in the first quarter figures for 2019 from Commercial Trust.

According to the latest figures, the number of submitted purchase mortgage applications for the capital rose by 4 per cent on the previous quarter, propelling London back to its position as the leading region for buy to let business applications – 15.8 per cent of overall business, closely followed by the South East at 14.5 per cent.

This followed the last quarter of 2018 which had seen the South East overtake the capital for the first time, with London buy to let in second place.

Strong results were also shown for the East of England and the North West, enjoying an increase in the proportion of buy to let applications submitted during the first quarter. The same two regions shared top billing for buy to let completions over the quarter, with each contributing 13 per cent of overall completions.

Remortgaging continued to dominate buy to let applications, with 60 per cent of business coming from landlords looking to refinance.

Chief executive at Commercial Trust, Andrew Turner, commented: ‘The effects of Brexit have been keenly felt in London and perhaps the stalling of house price growth has to some extent created a buyers’ market for buy to let.

Our latest figures underline the importance of London and the South East within the buy to let market. For the first quarter of 2019, these two regions contributed over 30 per cent of our buy to let purchase applications, an increase from the 26 per cent recorded in Q4 of 2018.

Whilst it is good news to see increased activity in London, movement is not restricted to that area and both the North West and East Anglia have also increased their proportion of overall purchase business during the quarter.

With Brexit now pushed back to later in the year, the combination of low interest rates, a wide variety of mortgage product choice, stalling house prices and soaring tenant demand, many investors are of a mind to invest in the private rental sector.’

Source: Residential Landlord

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Buy To Let Property Investors Back As Prices Fall

Buy to let property investors are returning to the market as falling prices make property investments viable according to independent estate agent, haart.

The agent found that the number of landlords registering for buy to let property has risen by 7.9 per cent on the month but has fallen by 21.8 per cent on the year across England and Wales.

In London, the number has risen by 11.8 per cent on the month but fell by 28.1 per cent on the year. The number of buy to let property sales has dropped by 2.6 per cent on the year across England and Wales and fell by 71 per cent in London. Average buy to let property sale prices are down 11.9 per cent across England and Wales annually, and by 12.4 per cent in London.

According to haart’s figures, house prices across England and Wales fell by 0.6 per cent on the month and by 5 per cent on the year with the average house price now sitting at £218,556.

New buyer registrations rose by 23.2 per cent on the month and by 7.8 per cent annually. The number of properties coming onto the market this month rose by 12.3 per cent and has risen by 1.9er cent on the year. In March, there were 12 buyers chasing every property across England and Wales.

CEO of independent estate agent, haart, Paul Smith, commented: ‘Three years on from George Osborne introducing the 3 per cent hike in stamp duty surcharges on second homes, landlords are beginning to come to terms with the additional costs and are cautiously entering the market again. Our branches across England and Wales saw a monthly uptick of 7.9 per cent in the number of landlords registering to buy, a figure which has been continuing to grow since the start of 2019.

Interestingly, sale prices to landlords are down by nearly 12 per cent on the year which may be spurring on this activity, these price decreases could be causing the available stock to fall within lower stamp duty thresholds, making the stamp duty levy a little easier to stomach. Despite this, landlords are not back in their hundreds, the number of registrations is still down 22 per cent on the year. Whilst some brave souls are re-entering the market, the hammering buy to let property investors received in terms of various tax changes is still fresh in many of their minds.’

He concluded: ‘Clearly investors are recognising the value that can still be found in buy to let property, especially in comparison to the overvalued and faltering stock market. Although the property market hinges on confidence, the FTSE 100, gold and cash are far more volatile to socioeconomic impact, so investors are increasingly returning to property where they deem their money safest, and where the yields are highest.’

Source: Residential Landlord