Marketing No Comments

Ringley: Now is the time to invest in BTL properties

Rental housing is likely to prove more resilient during this downturn than other real estate sectors, and landlords should therefore use this opportunity to invest in buy-to-let (BTL) properties, according to residential property consultancy Ringley Group.

Mary-Anne Bowring (pictured), managing director at Ringley Group, as said that people are more likely to rent than buy during a recession, and rent is typically one of the last things people stop paying during financial hardship.

Bowring said: “There is a huge opportunity still for buy-to-let investors in the UK rental market, which is only predicted to grow in size.

“That’s why institutional investors such as pension funds and insurers are investing billions in building homes for rent, as they see an opportunity to secure income-producing investments that hold up well during a downturn.”

Once the current crisis passes, pre-lockdown trends, including the predicted rise in the number of renters, will also continue.

This is due to affordability, changes in lifestyle and the job market, fundamentals which will remain post-virus.

To stimulate housing market activity and help landlords invest in BTL properties, Ringley has called for the government to exempt landlords from the stamp duty surcharge on second homes.

Bowring said: “Government efforts to restart the housing market should reflect long term pre-existing trends and that includes the continued growth in private renting.

“If the government wants to kill two birds with one stone – boost activity in the housing market and provide much needed rental homes – it should exempt landlords from the second home stamp duty surcharge immediately.”

In response to the growing demand for rental properties, as well as the effects of the COVID-19 lockdown, Ringley recently brought forward the launch of its automated lettings platform, PlanetRent.

Bowring said: “Proptech is evolving lettings fast as tenants must be seen as customers and the expectation is a frictionless, fully loaded experience, including immediate service which automation allows.

“It is important that buy-to-let landlords learn from institutional landlords to not fall behind the latest trends.”

By Jessica Bird

Source: Mortgage Introducer

Marketing No Comments

85% of buy-to-let lenders still lending

Some 42 of the 49 buy-to-let lenders operating at the beginning of March are still lending despite the impact of coronavirus, analysis from Mortgages for Business shows.

Together Money and Vida Homeloans have both pulled out of the market, while HSBC is no longer accepting buy-to-let applications.

However Santander, Clydesdale, Precise Mortgages and Kent Reliance have now restarted lending, after initially taking a step back.

Shawbrook and Paragon meanwhile are using virtual valuations against standard properties up to 75% loan-to-value.

Steve Olejnik, managing director of Mortgages for Business said: “Lenders have cut down the sorts of landlords that they will lend to.

“They’re pulling product ranges, tighten lending criteria, and increasing margins. But different lenders are derisking against different kinds of landlord borrowers. So, while some lenders are no longer lending to first time landlords, there are still lenders who are.

“My advice to landlords looking to remortgage is act sooner, rather than later. You may have to answer a few more questions when you’re applying for a remortgage that you would have had to last month – but a broker will still be able to find you a deal.”

Saffron Building Society withdrew from the market before the outbreak in March, though the lender has indicated that it will return to the market later in the year.

Lenders that have stopped lending to landlords since include: HSBC; Foundation Home Loans; Together Money; Vida Home Loans; Platform Home Loans; State Bank of India; and Furness Building Society.

BY RYAN BEMBRIDGE

Source: Property Wire

Marketing No Comments

Property Investment North And South Divide

Successful buy to let property investment can often depend on location – North, South, or the Midlands.

The latest research from peer to peer lending platform, Sourced Capital, has looked at where’s best to invest in bricks and mortar across the north, south and midlands regions of Britain.

Location can be vital when investing in property and regional influences can make the difference between profit and loss, so Sourced Capital has dissected the market based on the value of a property and the total value sold, as well as demand for these properties based on the volume of transactions.

The North-South divide is a very contentious issue but with the Midlands becoming a property powerhouse in its own right over the last few years, Sourced Capital totted up the totals based on: –

  • The North including the North West, North East, Yorkshire and the Humber and Scotland.
  • The South including the East of England, London, the South East and South West.
  • The Midlands including the East and West Midlands and Wales.

The figures show that despite much talk of the Northern Powerhouse, the South remains in pole position where the property market is concerned. In the last 12 months, house prices across the South have averaged £335,567 with £132.7 billion worth of property sold across 401,606 transactions.

The North doesn’t trail by much when it comes to the churn of property sales though, with 333,262 transactions over the last month, although the value of these properties is significantly lower with the average property going for £152,276 with a total value of £52.1 billion.

The Midlands and Wales accounted for the lowest level of transactions at 203,586 and while total value also trailed at just £38,4 billion, the average house price does exceed that of the North at £185,241.

Stephen Moss, founder and MD of Sourced Capital, commented: ‘When it comes to the sheer volume of transactions and the value of bricks and mortar, the South continues to lead the way and while this is largely driven by London, each region provides an attractive proposition when it comes to investing from both a demand and value point of view.

‘However, the North isn’t far behind when it comes to demand for housing and with the exception of the North East, it’s fair to say the property market across the majority of the North and even parts of the Midlands can go toe to toe with the South on transaction volume.’

Source: Residential Landlord

Marketing No Comments

Cost of buy-to let fixed rate mortgages declines

Research by online mortgage broker Property Master has revealed that the cost of all the fixed rate buy-to-let mortgage categories it tracks are down year-on-year.

Some rates have fallen by nearly £50 per month, which represents a saving of almost £3,000 over the course of a 5-year fixed rate mortgage.

Angus Stewart, chief executive at Property Master, said: “Another fall in the cost of borrowing is very good news for landlords.

“We know that there are landlords languishing on expensive SVR mortgages as the uncertainty around Brexit and political instability has put them off moving on to a more competitive fixed rate.

“With the current record low rates on offer these landlords should act quickly because if the “Boris bounce” becomes a reality it may allow interest rates to begin to rise back to more normal levels.”

“We are expecting a particularly busy next few months.

“This April it will be four years since significant changes were made to Stamp Duty.

“The decision by the then government to slap on a 3% surcharge on buy-to-let properties led to a mini-boom as landlords rushed to buy properties to beat the deadline.

“We suspect many of those landlords will be coming to the end of fixed rate mortgages around now and should be pleasantly surprised at what the market is prepared to offer them in terms of a good deal.”

Property Master’s February 2020 Mortgage Tracker shows the biggest year-on-year fall in cost was for 5-year fixed rate buy-to-let mortgage offers for 65% of the value of a property.

The monthly cost of a typical £150,000 mortgage for 65% of the value of the property fixed for five years fell by £48 per month between February 2019 and February 2020.

Year-on-year falls for 2-year fixed rate buy-to-let mortgage offers were more modest.

The cost of a typical 2-year fixed rate mortgage for £150,000 for 75% of the value of the property was down £25 per month year-on-year and for 65% of the value of a property by £19 per month.

However, both categories are at the lowest level they have been since Property Master began tracking rates in April 2018.

By Jessica Nangle

Source: Mortgage Introducer

Marketing No Comments

Buy-to-let rates fall but question mark hovers over optimism for market

Buy-to-let two and five-year fixed rates have fallen on average by more than a quarter of a percent year-on-year, analysis from Moneyfacts.co.uk revealed.

The average two-year fixed rate has dropped from 3.07 per cent in February 2019 to 2.75 per cent this month.

The five-year average fixed rate has fallen from 3.56 per cent to 3.20 per cent over the same period.

According to Moneyfacts’ analysis, if a landlord had a five-year fixed rate mortgage in 2015 and was looking to refinance, the average rate has dropped by 1.19 per cent. This would mean a difference of £1,947 a year in monthly repayments if a landlord were to take a loan of £250,000 on a 25-year term compared to back in 2015 for the same amount and term.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Lenders have cut rates on both short-term and long-term deals by around 0.30 per cent year-on-year, so there could be borrowers looking to switch their deal. Cutting down on monthly loan payments may be at the forefront of landlord’s minds considering the mortgage tax relief changes.

“Since April 2017, mortgage interest tax relief for buy-to-let landlords – which allowed them to deduct mortgage expenses from rental income to reduce a tax bill – has slowly been phased out. Indeed, by April this year it will be gone entirely, which means landlords could face a larger tax bill and less rental income as a result. This shake-up may deter potential landlords who feel their profit margins will be tightened, but despite this, optimism for 2020 appears resilient and lenders are clearly working hard to entice prospective borrowers. However, it is hard to tell whether this will wane as the year progresses.”

Landlords expect business to increase

Using a limited company to buy properties, rather than purchasing houses as an individual, is one way to side step the cuts to mortgage interest relief, although limited companies do come with their own tax burden.

Nigel Terrington, chief executive of Paragon Bank, said it was too early to tell whether recent positive surveys highlighting landlords’ improved confidence could be sustained.

The changes to tax relief for landlords and the introduction of three per cent stamp duty on second homes has caused thousands of landlords to exit the market or look for alternative ways to make money from the rental market. As well as setting up as a limited company, landlords are also looking to the holiday let market.

Research by the Association of Residential Letting Agents (ARLA) and Capital Economics found that of the overall landlord population, 2.7 per cent have changed from long-term tenants to short-term lets. This equates to 46,000 properties made unavailable to local people looking for a home. In London the issue is bigger, with four per cent of investors now offering short-term lets over homes previously used for longer term rentals.

The number of active listings on Airbnb in the UK increased by a third to 223,000 in 2018 from 168,000 in 2017, the research showed.

And in the capital, the number of active listings on Airbnb jumped four-fold from 18,000 in 2015 to 77,000 in 2019.

In Edinburgh short-term lets tripled in just three years, with 32,000 active listings in 2019, up from 11,000 in 2016.

Written by: Samantha Partington

Source: Your Money

Marketing No Comments

Limited company structure becoming standard for all BTL

Purchasing a buy-to-let property through a limited company is now the preferred route for all landlords regardless of portfolio size or type of property, research has shown.

The data, published by Foundation Home Loans yesterday (November 6), showed 62 per cent of landlords with one to 10 properties would purchase via a limited company, almost equal to the 65 per cent of those with 11 or more properties who said the same thing.

Previously landlords with larger portfolios were more likely to purchase properties through a limited company while those with smaller properties typically took out a buy-to-let mortgage in their individual name.

I think it will be the standard way the majority of landlords buy a property in the near future as the knowledge that limited companies are the most tax efficient way is filtering down and will soon become common knowledge

Nick Morrey

Overall almost two thirds (64 per cent) of the 888 landlords polled in September planned to make their next purchase within a limited company vehicle — up from 55 per cent of those asked in June.

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have hit landlords’ pockets.

How the rules changed:
An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Based on a property yielding £950 in rent and a £600 mortgage per month, the landlord’s income could drop by 57 per cent after the rule changes, from £2,520 to £1,080, as shown in the table:

Tax yearProportion of rental income falling under previous systemProportion of rental income falling under new systemTax billPost-tax and mortgage rental income
Prior to April 2017100%0%£1,680£2,520
2017-1875%25%£2,040£2,160
2018-1950%50%£2,400£1,800
2019-2025%75%£2,760£1,440
From April 20200%100%£3,120£1,080

Due to the tax shake up, limited company status is more attractive to landlords as changes would not affect them and they can offset mortgage interest against profits which are subject to corporation tax instead of income tax rates, which is cheaper.

Interest coverage ratios on limited company applications are also lower than for most individual landlord applications.

Nick Morrey, product technical manager at John Charcol, said the research was “very much” in line with what he saw in the mortgage market at the moment.

He put the latest surge in limited company popularity down to the fact more buyers and advisers were aware of the benefits and that from April this year only 25 per cent of interest qualified for tax credit.

He added: “I think it will be the standard way the majority of landlords buy a property in the near future. The knowledge that limited companies are the most tax efficient way is filtering down and will soon become common knowledge.”

By April 2020, no mortgage interest will qualify for tax credits on the old system.

Jeff Knight, director of marketing at Foundation Home Loans, said: “The rise in limited company usage by landlords shows no sign of tailing off, particularly as we have a more professional landlord community who recognise the benefits of using such a vehicle.

“It’s therefore perhaps no surprise to see a growing number of landlords signalling their intention to make their next purchase through a limited company.”

With a general election set for December 12, the housing market and buy-to-let in particular is likely to be a topic during the campaign.

Last month advisers urged the potential future government to tackle the fact successive pieces of regulation had made it harder for landlords to operate economically.

By Imogen Tew

Source: FT Adviser

Marketing No Comments

More lenders are offering limited company buy-to-let mortgages

More than half (59%) of all buy-to-let mortgage lenders offered products to landlords who use limited companies as borrowing vehicles in Q2 2019, Mortgages for Business has found.

Its Buy to Let Mortgage Index showed the number of providers serving corporate buy-to-let borrowers has been growing steadily since the cut in mortgage tax relief was introduced.

Steve Olejnik (pictured), managing director of Mortgages for Business, said: “The Index points to some good news for landlords, particularly those using limited companies who now have a greater choice of lenders than ever before, to help them finance their rental properties and access to better rates.

“In particular, we’ve seen the options increase at the more specialist end of the market, and we’re delighted that the number of lenders in that space is growing.”

The restriction of income tax relief on mortgage interest has meant that limited companies can be a more tax and financially efficient method of operating property portfolios than the self-employed route which was used predominately by landlords in the past.

In addition, the findings are also reflected in the total value of buy-to-let mortgage applications completed in the quarter at Mortgages for Business.

By value, more than half (52%) were from landlords using limited companies.

Furthermore, the gap in pricing between the average buy-to-let mortgage rate (3.1%) and the average rate available to limited companies (3.7%) diminished by 0.02% when compared to Q1.

Lenders’ margins over the cost of funds fell slightly to 0.54% from an average of 0.55% in Q1 2019.

While this is not a huge cut, it demonstrates that lenders are really having to squeeze margins to remain competitive.

Low loan-to-value products fared the best, with margins dropping below the 0.5% mark (0.48%) for the first time since Mortgages for Business started tracking costs and fees back in 2013.

There was an increase in the proportion of fee-free and flat fee-based products, up to 20% and 38% respectively.

This was to the detriment of percentage-based fees which fell to 40% despite having peaked at 48% at the end of 2018.

Mortgages for Business said this is a positive outcome for borrowers, who tend to dislike percentage-based fees and another sign that lenders are vying for business in a challenging market.

Flat lender arrangement fees, sitting at £1,504, fell slightly quarter on quarter which bodes well for landlords in need of finance.

By Michael Lloyd

Source: Mortgage Introducer

Marketing No Comments

Unprecedented fall in buy-to-let fixed rates

Fixed rates in the buy-to-let mortgage space have fallen across the board, according to online mortgage broker, Property Master.

Angus Stewart, Property Master’s chief executive, described this as “unprecedented”, and follows on from recent remarks by the Governor of the Bank of England that the UK leaving the European Union without reaching some sort of trade agreement may well require some sort of economic stimulus such as a cut in rates to weather the shock of no deal.

He commented: “We have been tracking buy-to-let mortgage interest rates in this way for 18 months and we have never seen before a fall across the board in this way. It is quite unprecedented.

“Last month we were seeing a drift upwards in the cost of buy-to-let fixed rate mortgages but it may be that the market is now expecting rates generally to fall rather than rise.”

“It is likely that lower rates are also being fuelled by the continuing increase in the number of buy-to-let mortgage products. Whilst it is true some lenders have exited the market others are boosting their range and competing hard for new business.

“As landlords continue to be pressed on all sides by rising regulatory costs such as the new Tenant Fees Act and falling tax reliefs today’s news of a lowering of mortgage costs will be very much welcomed.”

Property Master’s July 2019 Mortgage Tracker shows the biggest fall in monthly cost was for five-year fixed rate buy-to-let mortgage offers for 75% of the value of a property. The monthly cost fell by £36 per month June to July.

Five-year fixed rates for 65% loan-to-value fell month on month by £6. Five-year fixed rates buy-to-let mortgage offers for 50% of the value of a property fell by just £3 per month.

Two-year fixed rate buy-to-let mortgages for 50% and 65% of the value of a property fell by £5 each. Two-year fixed rate buy-to-let mortgages for 75% of the value of a property fell by £8 per month.

The Property Master Mortgage Tracker follows a range of buy-to-let mortgages for an interest-only loan of £150,000. Deals from 18 of some of the biggest lenders in the buy-to-let market including Barclays, BM Solutions, RBS, The Mortgage Works, Godiva and Precise were tracked. Figures for this month’s Mortgage Tracker were calculated on deals available on July 1, 2019.

Property Master was launched almost two years ago and aims to shake up the buy-to-let mortgage market currently served by around 12,000 mortgage brokers. It has already attracted financial backing from a broad range of private investors including a minority stake being taken by LSL Property Services, whose estate and letting agency brands include Your Move and Reeds Rains.

Property Master has automated what was a manual, complex process to provide landlords with a free easy to use mortgage search tool which provides a mortgage quote that is pre-screened against each lender’s specific and changing criteria.

By Joanne Atkin

Source: Mortgage Finance Gazette

Marketing No Comments

Landlords holding back from further purchases over next 12 months

Fewer than a third of landlords would add to their buy-to-let portfolio over the next 12 months, research claims.

A survey of 5,000 landlords by letting agent Benham and Reeves, assessed sentiment in the property sector amid tax and regulatory changes.

The majority (83%) said they were unlikely to sell up this year, but just 28% said they would consider investing in a property in the next 12 months.

Half said they would consider expanding their portfolio within the next five years.

Two thirds of landlords said the proposed changes to Section 21 notices made them more cautious about investing in a further property, while opinion was divided over changes to mortgage interest relief  and whether the sector still provided a good investment as a result, with 49% believing it is and 51% no longer sure.

Despite this uncertainty, 73% considered property is still the best and least volatile long-term investment when compared to all other asset classes.

More than a third (37%) felt very confident that they will see an adequate return on their portfolio over the next ten years, with a further six per cent stating they were extremely confident and 51% not as confident.

Marc von Grundherr, director of London-based Benham and Reeves, said: “The Government has really gone to war with buy-to-let investors of late and a consistent string of detrimental changes to the sector through Stamp Duty increases, tax relief changes and a ban on tenant fees has had the desired impact of denting industry sentiment and dampening appetite for future investment due to a reduction in profitability

“However, for the institutional buy-to-let investor, this is but a mere blip on a much longer timeline, and the overwhelming overtones are that while Brexit poses a challenging obstacle for the immediate future, the market remains the investment option of choice with many confident on a return further down the line.

“This is a testament to the durability of buy-to-let bricks and mortar in the UK as, despite a Government-backed clampdown, it remains a lucrative business and one that continues to gain the backing of those that are on the frontline.”

By MARC SHOFFMAN

Source: Property Industry Eye

Marketing No Comments

Buy-to-let revealed! The most in-demand cities for renters today

It was once the destination of choice for buy-to-let investors, but London has fallen way out of favour with both would-be and existing landlords over the past year.

The electrifying property price growth of recent decades may have required some truly staggering wads of cash for people to build their property portfolios. However, the rate at which rents were also booming in the capital meant for many this was a price worth paying.

How things have changed since then. London is no longer considered hallowed ground by buy-to-let participants. Added to the problem of stagnating or even falling property prices in some boroughs, changes to stamp duty on second homes have also resulted in eye-watering payouts to the taxman compared with those of previous years.

Bristol’s best
There’s a treasure trove of evidence showing returns in other British cities now exceed those you can expect from investment in the capital. And new research from Bunk gives fresh ammunition for landlords to give London short shrift and buy elsewhere.

According to the lettings platform, which sought to discover the country’s most in-demand city based on which have the highest number of properties already let as a percentage of total listings, Bristol came top of the pile with a score of 50%. Newport and Nottingham followed in second and third place, respectively.

Top 10 Cities By Demand

Location / Rental demand

  • Bristol 50%
  • Newport 39%
  • Nottingham 36%
  • Plymouth 34%
  • Cambridge 34%
  • Portsmouth 32%
  • Bournemouth 30%
  • Oxford 29%
  • Manchester 26%
  • Glasgow 25%

Commenting on the data, Bunk co-founder Tom Woollard said: “We’re starting to see a real change in the rental market with a number of the more alternative cities coming to the forefront in terms of popularity,” with renters seeking out great places to live without the huge rents that come with so-called traditional cities.

London found itself languishing in the bottom 10 of Bunk’s report with a score of just 21%.

Bottom 10 Cities By Demand

Location / Rental demand

  • Aberdeen 8%
  • Newcastle 14%
  • Edinburgh 14%
  • Leeds 16%
  • Swansea 16%
  • Liverpool 18%
  • Cardiff 21%
  • Belfast 21%
  • London 21%
  • Sheffield 22%

Sticking with stocks

I have to confess, though, that this latest set of data isn’t enough to encourage me to get involved in the Bristol buy-to-let scene. No thanks. Given the mix of rising costs and increasing paperwork, not to mention the vast amounts of initial cash needed to buy property in the UK, I’d rather stick with stock investing.

And what a time to be an investor in equity markets right now. Dividends from the world bourses are hitting record high after record high. While signs of a slowdown in the global economy are predicted to dent many a company’s earnings in 2019, any such slowdown are unlikely to harm payout growth in the immediate future.

Take a look at the FTSE 100, for instance. The average forward dividend yield for the index sits at a chunky 4.3%, though this is not the only reason to grab a slice of some of Britain’s blue-chips. As I type, some of the index’s big hitters are trading on irresistibly-cheap valuations, something which is illustrated by the Footsie’s low forward P/E ratio of around 13 times.

My tip? Take advantage of the recent reversal in FTSE 100 share prices and go grab a big-dividend-paying bargain, or two.

By Royston Wild

Source: Yahoo Finance UK