Tag Archives: government
Survey finds over half of buy let landlords unaware of mortgage changes
Over half of buy to let mortgage applicants in the UK are unaware of forthcoming changes to mortgage tax rules and other changes that could affect their application, a new survey has found. Indeed, it is accidental landlords, those who did not intentionally set out to rent out a property, are least likely to know about these regulatory changes, according to the research from landlord insurance provider Direct Line for Business. It found that 62% of applicants were unaware of either the changes to mortgage tax relief or the European Union’s Mortgage Credit Directive (MCD), both of which could impact their ability to secure a mortgage. This lack of awareness rises to 71% amongst accidental landlords. This comes as it is estimated that accidental landlords account for around 17% of new mortgage applications, with overall buy to let mortgage applications growing by 29% in the past year. The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy to let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as consumer lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests. Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy to let property will pay an extra 3% stamp duty. ‘The new EU legislation on mortgages coupled with the Government’s increase in buy to let taxation could significantly alter the buy to let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord,’ said Nick Breton, head of Direct Line for Business. ‘With house prices in the UK rising by 7% in the year leading to October 2015, and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city,’ he added. The firm urges landlords to make the most of existing tax benefits. Any money spent on keeping a property in a good state of repair is tax deductible, as are all broker and arrangement fees. Landlords can also claim the whole cost of council tax or utility bills that a tenant would pay. It also says they should keep up to… Continue reading
Call for UK wide housing review to access impact of buy let tax change
A long term, strategic comprehensive review of housing policy and housing need in the UK is needed as recent changes are set to distort the property market, it is claimed. In particular, the Government ought to recognise the contribution of private landlords as tax changes could seriously affect the buy to let market to the detriment of those who cannot or choose not to buy a home. In a response to the Government’s new stamp duty regime for second homes, Paragon Mortgages says that there should be a comprehensive review looking at the housing dynamics over the last 30 years. ‘Whilst we agree that support for home buyers is an important strand of housing policy, if the interests of home buyers are prioritised above the interests of those in the Social Rented Sector (SRS) and the Private Rented Sector (PRS), then serious distortions may arise as a result to the detriment of those who cannot afford to buy or choose not to buy,’ the document says. ‘Policy changes that may result in reduced supply of properties to the PRS, risk driving up rents and constraining choice to the disbenefit of those who rely on the PRS for a home without delivering corresponding benefits in owner occupation,’ it explains. The document also says that there are more significant structural issues at play in the heart of the housing market so the review is needed to look at housing provision across all tenures. Paragon has been operating in the buy to let market since the inception of this specialist finance for landlords in 1995 and says that it has extensive experience of the market, a deep understanding of how landlords operate and how important buy to let finance is to the supply of property to the PRS. ‘What the Government appears to be overlooking with their focus on driving up home ownership, is that regardless of aspiration, home ownership is not a suitable solution for everyone. Some demographics need and want to live in the PRS because it best suits a variety of their individual requirements including lifestyle choice and financial capability,’ said John Heron, director of mortgages at Paragon. ‘The proposed 3% increase in Stamp Duty will not bring the market to a grinding halt and is unlikely to deter most landlords from their current, immediate investment plans but it will undoubtedly impact on some landlords’ future plans for growing their portfolios,’ he explained. ‘Our fundamental issue with these changes and also the proposed changes to tax relief of mortgage finance is that private landlords provide a valuable contribution to the wider housing market mix and this is not being recognised,’ he added. ‘With a declining social housing sector and with more people choosing not to buy their own home, it is important that the service the PRS provides is not overlooked,’ he concluded. Continue reading
UK housing supply halves in 10 years and first time buyers still struggle
The supply of available housing to buy in the UK has almost halved in 10 years and first time buyers are still struggling to get on the housing ladder, according to estate agents. The average number of properties available per branch in December 2015 fell to 37 properties, the latest housing market report from the National Association of Estate Agents (NAEA) shows. It is the joint lowest figure for 2015 with September, and almost half the number available in December 2005 when there were an average 72 houses per branch. There were 45 houses available in December 2014. While the number of house hunters registered per branch fell to 374 in December from 403 last month, an expected seasonal trend, the number of house hunters per branch has gradually increased year on year. In December 2014, there were 360 potential buyers registered at each branch, up from 302 in December 2005. Low supply affected the number of sales in December, as NAEA members reported an average of seven sales per member branch, an expected seasonal dip, and the lowest recorded in 2015. ‘Whilst we expect figures for supply and demand to be seasonally low in December, 2015 overall does not paint a positive picture for the housing market. Supply of housing is half of what it was 10 years ago,’ said Mark Hayward, NAEA managing director. ‘Yet the number of home buyers on the books has been gradually increasing. When there is such a huge and widening gap between supply and demand, a level playing field seems further out of reach for many would be house buyers,’ he added. The report also suggests that the Government’s recent efforts to help first time buyers enter the property market such as Help to Buy and plans to build new starter homes are yet to take effect. The number of sales to first time buyers stands 24%, a 2% drop from December 2014. It also reveals that the recent 3% increase to stamp duty on buyers’ second properties has created movement in the market. Some 44% of NAEA agents have seen an increase in house buyers trying to beat these reforms, and snap up their properties before they come into force in April. ‘The issue of lack of supply needs to be solved, but it isn’t going to be done anytime soon. We are still waiting to see new homes being built and whilst we wait, house prices continue to rise,’ said Hayward. ‘There is some potential light for first time buyers however, once the new tax rate increase in April is in place we may see less investment from buy to let or second home investors, which may mean less competition for first time buyers,’ he added. Continue reading
