Portfolio landlords in it for the long term

Although the various changes in the buy-to-let sector over the last 5 years have resulted in some landlords selling up, there has been little sign of larger portfolio landlords looking to exit the market in significant numbers. A recent survey by Moore, the accountants, shows that the number of landlords with a portfolio of 10 or more properties has remained constant over the last couple of years at around 43,000. This seems to show the underlying strength of the Private Rental Sector in the UK and indicates that many buy-to-let investors look at it as a long-term prospect.

Larger professional landlords may be better able to adapt to changing circumstances with a more diverse portfolio and look at other options for higher yielding properties, such a HMOs or multi-unit blocks. They may also look at geographic regions further afield to take advantage of better performing areas of rental accommodation.

Certainly, at Property Hawk Mortgages we are experiencing a continuing demand for more specialist mortgage products that are aimed at complex property scenarios and professional landlords with expanding portfolios. The experienced buy-to-let investors we talk to are surprised that more lenders don’t provide mortgages to larger portfolio landlords as they perceive themselves to be a better risk than someone with 3 or less properties and are often irked if they have to pay higher rates.

To discuss your buy-to-let mortgage requirements please contact the Property Hawk Mortgages team on: 029 2069 5446

Or use our free online mortgage search tool at Property Hawk Mortgages

New bridging finance option

InterBay launches bridging finance proposition https://t.co/J43hPRYY3T pic.twitter.com/R0klXrl2E0

— Mortgage Introducer (@MortgageChat) July 18, 2017

Search the whole BTL mortgage market free 

Email:info@propertyhawkbtlmortgages.co.uk

Tel: 029 2069 5446

Your home may be repossessed if you do not keep up repayments on your mortgages. The Financial Services Authority does not regulate some forms of mortgage.

Landlord Mortgages and BTL Finance Are Key

There are two things that make for a successful residential investor. Firstly, there is getting good tenants; bringing landlords a regular and recurring income to service their debt.

The other is access to debt at a reasonable cost - a mortgage at a low rate.

Landlord Mortgages - a potted history

There is a lot to BTL and landlord mortgage finance; it is more complex and involved than a standard mortgage. Landlords have lived through extraordinary times in terms of access to debt recently.  In the 90s we had the emergence of the whole buy-to-let industry, when lenders recognised that lending against property to bone-fide landlords using an AST was not such a bad thing.  The BTL boom meant that landlords could get their hands on ridiculous amount of cash with literally no capital,  making them and the lenders vulnerable to any down turn in capital values. 

Then, came the inevitable crash. 

The 'credit crunch' meant that debt became a dirty word overnight.  Cash was again 'King', and low rated landlord mortgages were only there for landlords with 30% + of cash to put down.

In recent years we have seen the relaxing of this tight lending criteria, and now, once again landlord mortgages are readily available with Loan To Values (LTV) as high as 85%. 

Back to the boom days?! Well almost.  Now we have the Prudential Regulation Authority (PRA) wading into the mix and scuppering the happy days of easy lending.

PRA - Landlord Mortgage Controls

The Prudential Regulatory Authority (PRA) are a new organisation set up as part of the Bank of England to maintain stability within the economy.  One of the parting shots of the last Chancellor George Osborne was to slap on a tightening of the financial screw on lending to the buy-to-let sector by giving more restrictive guidelines to banks  underwriting the landlord mortgages.  In essence what it means to me and you it means that landlords will be able to borrow less again reversing the easy credit environment of the last few years.  The way that this will effect landlords is that the PRA have added an affordability test that requires landlords to be able to afford repayments based on an assumed interest rate of 5.5% as a posed to that which they actually pay.  This has had the effect of increasing the amount of rental cover required by many lenders from what was an industry average of 125% of the rent to 145%.  Portfolio landlords (defined as 4 or more properties) will face much tighter tests on their income than previously.  This element of the changes is due to come in from 30th September.

The motto of the landlord mortgage story is that whilst lending will not be as tight as it was before the buy-to-let revolution or after the credit crunch; the days of easy access to landlord mortgages and BTL mortgage finance are probably over for now.

Mortgage Search - all your options

Tax hike to affect half a million landlords

Landlord tax hike

The tax hike or raid instigated by the government changing the way they work out a landlords rental profit leading to massive tax rises for some landlords could affect up to 440,000 landlords according to claims by the National Landlords Association.

Proposed tax changes will push landlords into higher tax bracket

The changes resulting in the loss of mortgage interest tax relief which are to be staggered will no longer allow higher rate tax payers to offset all their mortgage interest charges against their rental income.  As a result over a fifth of landlords claim that they will be pushed into the higher tax band triggering a higher rate of tax and an increased tax bill for many landlords.  Some landlords have been investigating using a company structure to reduce their tax bill.  This works because a landlord operating through a company will continue to be able to offset their entire mortgage interest bill.  We have explored previously whether landlords should incorporate their rental business.

Law society of landlord tax change

The way that the government has brought in the legislative changes to the landlord tax system on income tax has been criticized by a number of organizations.  The law society has actually slammed the way the finance bill has been introduced.  Despite these criticisms it is very unlikely that the government will back down.  In fact Cherie Booth ( Blair )representing a group action by landlords recently lost their case challenging buy-to-let tax changes.

More tax info:

5 ways to slash your tax
Calculate your tax return with our free online property manager
Capital gains tax explained

Landlord insurance - professional rates - online brokers

Paragon profit - but BTL outlook uncertain

Paragon profits, but buy-to-let outlook uncertain https://t.co/masnfy3dzw

— FTAdviser (@FTAdviser) May 24, 2016

Take advantage of our discounted landlord insurance rates

Chart showing UK buy-to-let loans

Buy-to-let loans totalled 70,500 in Q4 2015, down 1% on Q3 but up 31% year-on-year. https://t.co/Sy4lET7Pai pic.twitter.com/XuChtTc4Ff

— CML press office (@cmlpressoffice) February 16, 2016

Mortgage search - finance my investment

FT warns on buy-to-let

Reports in the FT warns that purchases of buy have peaked and will start to decline from 2016.  The Council of Mortgage Lenders says that it expects purchases of buy-to-let investment properties to fall from about  116,000 in 2015 to 105,00 in 2016 and then 90,000 in 2017.

Fall in investment numbers by landlords

The fall in investment numbers by landlords could be seen as a double sided coin. Less investment means less additional competition in the lettings market.  This is no bad thing. Many of us longstanding landlords have experienced a flood of new landlord entrants into the market which despite Government worries over rent rises has actually suppressed rental growth (outside London).  However, if you dig deeper on why the numbers of purchasers are expected to fall then the news gets more sinister.

Consultation exercise launched on clamp down on buy-to-let

We all know that the growth of buy-to-let in recent years has part being as a result of attractive rental market where more people are looking to rent rather than buy.  However, the ability of landlords to finance their investment has also been critical to the growth of the sector.  From a situation after the depression in the early 1990s where obtaining a commercial loan to buy residential property was virtually impossible (I remember having to practically beg my bank manager for a loan & the most he give me was a 15 year repayment on a double digit interest rate).  The opposite has occurred following (ironically what was know as the 'credit crunch') in that there has been a massive explosion of lending to landlords on terms that are often as attractive to those looking to buy there own home.

All the above has spooked the Bank of England governor Mark Carney who sees it as potentially destabalising as people seek to use 'cheap money' to gear up on property investment and not pay sufficient regard to what will happen when interest rates start to rise.

Bank of England expected to act to curb lending

This leads us to expect the Financial Policy Committee (FPC) to push for extra powers to regulate mortgages in the sector.  The mechanisms for this would be for the Bank of England to require banks to hold more capital against these loans which effectively would drive up the cost of providing the capital.  This is then passed onto landlords as higher costs of lending which will obviously deter some landlords from going ahead with their investments.

To read more about the crackdown on buy-to-let mortgages.

Landlord insurance - professional rates - online brokers

Chancellor to restrict buy-to-let mortgages

George Osborne has announced that he wanted to give the Bank of England more powers to regulate buy-to-let mortgages.

The announcement which came out of the blue is in response to Mark Carney the head of the Bank of Englands repeated warnings that a buy-to-let bubble could represent a threat to the stability of the economy.

Changing Housing Market

The changing housing and mortgage market now means that the proportion of Britons owning their own home has fallen to a 26 year low.  Many house buyers are unable to obtain a large enough mortgage to enable them to buy there own home and the Chancellor responded to an overheating London housing market by restricting banks to be able to lend no more than 15% of mortgages to people borrowing over 4.5 times their income. Despite the worries over an overheating buy-to-let market lending still remains below the amount borrowed in the boom just before the financial crash.

Up until recently the Chancellor had resisted calls by the Bank of England for greater controls over buy-to-let mortgages.  However,  he has now responded to MPs questions by stating:

"The Governor of the bank and the FPC (Financial Policy Committee)  have asked for additional powers over buy-to-let mortgages, which weren’t included. We have granted those powers so that they have that tool as well.”

Previously in 2014 the Bank of England had asked the Chancellor for additional powers to cap the size of landlords mortgages based on their expected rental income.  The Chancellor decided against this instead putting the matter out for further consultation and thereby 'kicking it into the long grass'.

Buy-to-let Search - Landlord Mortgages

Buy-to-let mortgages top 1000

The number of available buy-to-let mortgage deals has hit 1000 for the first time since April 2008 according to Moneyfacts.

In April 2008 just before the financial crash there were 1,128 deals. This plummeted to 476 by August 2008.

There has been a slow recovery in mortgage products available with 460 in August 2013, 681 in August 2014 and today 1,011 buy-to-let mortgage products available. There has also been a considerable change in the mortgage rate since the credit crunch with the average variable mortgage rate dropping from 6.66% in April 2008 to 3.6% today. Fixed rates have also fallen from 6.48% to a lowly 3.8%.

Mortgage Search - all of market - expert broker

Landlords the billion pound baby

Landlords are looking to be the billion pound baby in 2015 according to figures released by the Council of Mortgage (CML).

Data released by the Council found that the wealth controlled by landlords reached £990 billion in 2014 and has risen 70% since the financial crisis in 2007.

Landlord loans continue to be the fasted growing area of the market as more landlords look to expand their portfolios and newbie landlords enter the lettings market. Many longstanding landlords have paid off their mortgages resulting in the overall indebtedness of the buy-to-let sector being low at 19% of the value of the rented property meaning that £643 billion of the £990 billion is debt free giving many landlords the opportunity to lever in additional funds to expand their buy-to-let portfolio.

Landlord mortgages -  expert broker

Lender addresses 'ageism' in lending

The latest pension reforms taking effect from Monday 6th April allow people to extract a lump sum from their pension pot.  Reports in the media are that this will encourage a whole load of newly retired pensioners to invest their 'lump sum' into purchasing a buy-to-let as an income producing asset and an alternative to an annuity. 

Claims of a rush into buy-to-let  'overblown'
I personally think that claims of rush of newly retired pensioners buy-to-let are much overblown.  A small number no doubt will consider it.  The reality is that if you are retired, do you really want the hassle of a whole load of extra maintenance responsibilities and tenants to look after.  Probably not.  However, for the brave there is good news in the shape of a new buy-to-let mortgage from The Mortgage Works that will allow lenders up to the age of 70 a 35 year mortgage meaning that in theory you could be over a 100 years old before the loan is repaid.  Previously most mortgage companies would not lend where repayment of the capital sum extended beyond a landlords pensionable age say 65. 

The Mortgage Works addresses 'ageism' in lending
This more flexible approach from The Mortgage Works who are part of the Nationwide Building Society is to be welcomed for older landlords who often have the time and life skills to make very good and attentive landlords.  Whether they have the enthusiasm and drive to take on the extra responsibility when most people are winding down is yet to be seen.

BTL Mortgage Search - whole of market - expert advice

Metro Bank drops buy-to-let rates

The Metro Bank has reduced rates on it's own buy-to-let mortgages by bringing in a 2 year fixed rate of 2.69%.

There is also a 2 year tracker rate available to landlords of 2.69% up to a loan to value of 75%.

Free BTL Mortgage Search

Mansfield BS reduces fixed rate

Buy-to-let mortgage provider the Mansfield Building Society has reduced the rate on it's 2 year fixed rate mortgage by 0.5% from 3.99% to 3.49%.

The buy-to-let mortgage is available up to a loan to value of 70%.

To search buy-to-let mortgage products have a look Property Hawk Mortgages for the latest rates.

Buy-to-let mortgages a growth story

Landlords are borrowing more than they did a year ago and are the only group to up their lending according to latest reports in the Telegraph.

CML figures for November revealed that buy-to-let mortgages and lending to landlords is up 9% compared to a year earlier whilst lending to mainstream home buyers fell by 7% and to first time buyers was 3% lower than a year ago.

There were a total of 17,700 buy-to-let loans in November representing lending of £2.4bn.  The mortgage activity for landlord was roughly evenly split between new purchases and remortgages of existing buy-to-lets with 8.900 loans being advanced for new investment property purchases and 8.600 remortgages were given to remortgage an existing buy-to-let investment.

Mortgage Search - whole of market

Buy to let lending hits post crash high

The Bank of England's official data shows that buy-to-let mortgage lending hit the highest level since the crash of 2008.

Official data showed lending rocketing from £5.9 in the 3rd quarter of 2013 to £8bn in the same quarter this year.

Buy-to-let mortgage choice continues to increase with Moneyfacts reporting in July that the number of buy-to-let mortgage products had expanded to a post crash high of 665, a rise of 42.7% on a year earlier.

The cost of borrowing for landlords also continues to fall with rates of 4.17% for the average fixed rate and 4.03% for the variable rate mortgages as of July this year.

Buy-to-let mortgage search - free investment tool

Buy-to-let mortgages up 40%

The variety and number of buy-to-let mortgage products has hit a post crash high according to Moneyfacts.

They have reported that the number of buy-to-let mortgage products in July now stands at 665.  This is up 43% from the same time last year.

Despite the rise the figure remains a long way down from the pre-credit crunch figures of 3,662 mortgages.  A heady and distant memory!

Mortgage Search - expert broker

Self employed buy-to-let mortgage

If like me you are self employed and looking for a buy-to-let mortgage be it a remortgage or one to buy an new property you will probably need a SA302?

What is an SA302?

It was a new one to me.  Apparently, it was a form introduced back in 2009 by HMRC to verify the amount of tax you have paid. As buy-to-let lenders have tightened up on their lending criteria many mortgage companies have utilised the SA302 as a basic proof of income.  This is useful for many of us landlords who often have income from multiple sources and therefore don't fall into that neat PAYE category whlist wouldn't exactly class ourselves as 'short of a penny'.

Where can a landlord get an SA302?

Surely I can download a SA302?  Well you can by logging in to your self assessment page and then going to your tax return options.  This will then allow a landlord to select a tax year and download the relevant information.  The only problem is with downloading your own SA302 is that many mortgage companies will not accept these downloaded versions.  I don't know why...in case somebody has tried to forge them perhaps?  So a landlord is better off phoning the HMRC direct on 0845 900 0444 and getting them to send them a copy.  It should take about 10 days in the post.  I've just applied for mine and hopefully this will unlock the 5 year fixed rate remortgage that I'm going for.  I'll keep you posted!

Mortgage Search - best 5 year fixed rates

Income caps on BTL mortgages

The latest news is that Government owned RBS is acting to put an income cap on new mortgages limiting loans to 4.99 times the applicants income from effect from Monday (14 July).

This policy is inline with attempts from the European Union to exert greater control over residential investment mortgages.  We have said in the past that income based control of lending does not help landlords or greater investment in the private rental sector.  In Property Hawk's view it is not a good measure on it's own of affordability of a mortgage.

Clearly, this move is politically led.  A bank 81% owned by the Government is being used as an instrument to calm a perceived overheating housing market.  Whilst the market might be white hot in the market surrounding the 'Westminster Bubble.' This is clearly not so in the rest of mainstream UK. It does however illustrate why business does not belong in the hands of the public sector and the politicians.  These arbitrary mortgage income limits on buy-to-let mortgages will only drive landlords into the arms of other lenders reducing the profitability of a bank that will clearly end up being sold in the coming years at less than it should be if allowed to operate on a purely commercial basis.  With buy-to-let mortgage repossession rates being below that of owner occupation and with many of the buy-to-let mortgages being secured based on the rental levels of the proposed investment, not on the landlords income.  The rational for this income link is not clear.  But there again, this is not a rational commercial move it's political, which for us simple landlord folk explains everything.

Mortgage Search - whole of market - expert advice

Interest rates could rise

What is the likelihood that interest rates are likely to rise this year? This is the question that is on many landlords lips who are trying to plan their mortgage strategies going forward into next year. Mark Carney at his Mansion House speech last week told his audience of big wigs but really it is aimed at us all; that the journey back to normalised interest rates may start earlier than you think (in essence later this year). We have ruminated before on where next for interest rates as it is the most important economic variable faced by any geared landlord.

My view is that Carney is marking the end of this historic period of low interest rates without choking the normalisation of the property market and the rest of the economy.  How should landlords respond? No landlord should panic and over react.  Having said that I will be making sure that I finish my application for my 5 year fixed rate mortgage at just over 4% this weekend.  I'm pretty sure that this rate wont be around for much longer and in a couple of years time we will all be look back with incredulility at how low the fixed rates really got.

Mortgage Search - best fixed rates - expert advice

Landlords earn double average wage

Landlords earn double the average national income according to recent research. My experience in recent years that bucks for effort my property portfolio generates far more cash per hour work than my other ventures.

Research on landlord income
The research from BRDC indicates that the average landlord takes almost £60,000 in rental income from a portfolio valued at £1.2 million and comprising of 8-9 properties. This is over double the average wage of £27,174.  I'm guessing that the average is inflated considerably by the London effect but I would agree that it certainly is in the right ball park.

My strategy
My strategy over the next few years is to fix some of the mortgages I have to lock myself into the low interest rate environment and also pay down some of my debt by transferring some of my mortgages to repayment from their current interest only status.  In this way I'm hoping that my rental portfolio continues to generate a significant income even after the current interest rate environment normalizes over the next few years.

MORTGAGE SEARCH - whole market - expert advice