Category: Buy-To-Let Mortgages & Finance

TLA Landlord Survey Q2, 2020 (TLALS)

TLA Landlord Survey Q2, 2020 (TLALS)

Introduction and main findings

  1. The 2019-20 TLA Landlord Survey (TLALS) is a survey of landlords and letting agents who own and/or manage privately rented properties in England.
  2. The aim of the TLALS is to provide understanding of the characteristics and experiences of landlords and how they acquire, let, manage and maintain privately rented accommodation.
  3. Since 2010, the private rented sector has undergone substantial growth and change. The number of households in the sector rose by 25% between 2010-11 and 2018-19, from 3.6 million to 5.5 million households.
  4. The private rented sector is now the second largest tenure in England, and is home to over a fifth of all households.
  5. The private rented sector is characterised by diversity, containing a wide range of different sub-markets, serving a wide range of different types of households across all incomes, including an increasing number of families.
  6. In 2019, 46% of households in the private rented sector included dependent children (2.6 million households, up from 1.1 million in 2010-11).
  7. There are high rates of turnover in the private rented sector, with the number of house moves significantly higher than in the owner occupied and social rented sectors, both within the sector and between it and the other sectors.
  8. Since 2010, there have also been a number of policy changes affecting private landlords. These include tax changes for Buy to Let landlords, changes to the Stamp Duty Land Tax, tightening lending criteria on Buy to Let mortgages and the growing role of the Build to Rent sector.

These changes were made as part of the government’s wider efforts to make the housing market work for everyone and to ensure the housing market delivers the homes the nation needs.

The survey involved agents who let and / or manage property on behalf of landlords. For brevity, the term ‘agent’ is used throughout the report to describe agents who let and / or manage properties.

This report provides an overview of the private landlord population in England.

The first chapter covers the characteristics of landlords, why and how they became a landlord and how they view their current role.

We also include an overview of private rented dwellings and the households living in them, including the types and location of rented homes and the types of tenants. It also explores how landlords and agents set rents and the circumstances around how tenancies end.

Our survey examines landlord and agent attitudes, including the willingness of landlords and agents to let to different types of tenants and views on longer tenancies. It also presents findings on landlord and agent compliance with current legal requirements.

Other chapters provide evidence regarding the likely future of the private rented sector by setting out findings about landlords’ stated future plans, attitudes towards landlord insurance, boiler care issues and other landlord trends and habits – both past, present and in the future.

Full details of the survey sampling, weighting and reporting conventions are in the technical notes at the end of this report.

Briefly, the TLALS is an online survey of almost 8,000 landlord members of The Landlord Association and 550 lettings agents – all of whom are registered with The Landlord Association or partnering without profit or monetary gain.

All statistics were gathered between December 13th 2019 – January 22nd 2020 and reflect results for the period between January 20th 2019 to December 1st 2019.

Main Findings

These correspond to an estimated 1.8 million landlords operating in the private, residential property rental sector.

Most landlords operate as private individuals rather than as part of a company or organisation.

94% of landlords rent property as an individual, 4% as part of a company and 2% as part of some other organisation.

While almost half of landlords own just one property, half of private rented sector tenancies are let by the 17% of landlords with five or more properties.

45% of landlords have just one rental property. This represents 21% of the private rented sector.

A further 38% own between two and four properties (representing 31% of the sector). The remaining 17% of landlords own five or more properties, representing 48% of the private rented sector.

Ignoring the methodological differences, since 2010, the proportion of landlords with just one property has declined from 78% to 45% or from 40% to 21% of the sector. Meanwhile, the proportion of landlords with five or more properties increased from 5% to 17% or from 39% to 48% of the sector.

Landlords are, on average, older and less ethnically diverse than the general population. Most have been landlords for some time.

Over half (59%) of landlords are aged 55 years or older. Not surprisingly, given the older age profile, a third (33%) of landlords are retired. The majority (89%) of landlords are White.

70% of landlords have let property for 6 years or more. The average (mean) length of time that landlords had let property was 11.5 years.

Landlords most commonly reported that they had become landlords because property was preferable to other investments and/or to contribute to their pension.

46% of landlords became a landlord because they preferred property to other investments; 44% did so to contribute to their pension. Only 4% became a landlord to let property as a full-time business.

Although 53% of landlords bought their first rental property with the intention of renting it out, 32% did so to live in themselves.

Landlords who had been letting for longer were more likely to have used a mortgage to fund their first rental property and more likely to currently use a Buy to Let mortgage compared to more recent landlords.

Almost two thirds (63%) of those who had been a landlord for three years or less had used a mortgage to fund their first rental property compared to three quarters of those who had been a landlord for longer (73% of those who had been a landlord for between four and 10 years, and 75% of those a landlord for 11 or more years).

About half (49%) of those who had been a landlord for three years or less had a Buy to Let mortgage to fund their current property/ies.

This increased to 58% of those who had been letting for between four and 10 years, and 54% for those letting for 11 or more years.

Landlords, on average, report a gross rental income of £15,000 per year (before tax and other deductions). For most landlords income from rent makes up two fifths (42%) of their total gross income.

The average (median) gross rental income (before tax and other deductions) is £15,000. Three in five (61%) landlords had gross rental income of less than £20,000, while a further quarter (26%) reported between £20,000 and £49,999.

Thirteen percent reported a gross rental income of £50,000 or more.

Using their annual reported gross income (before tax and other deductions and excluding rental income) and their gross rental income, it was calculated that landlords received 42% of their total gross income from rental property.

Over the next two years, half of landlords plan to keep the number of rental properties the same, with similar proportions planning to increase the number of properties as those planning to decrease or leave the rental business.

53% of landlords planned to keep their number of rental properties the same, with 11% planning to increase the number of properties they own. This compared with 10% of landlords who planned to reduce the number of properties (representing 18% of tenancies) and 5% planning to sell all their rental property and leave the
rental business (representing 5% of tenancies).

Letting practices vary between landlords and agents. For example, agents are more likely than landlords to increase rent for a new tenant and for a tenancy renewal. They are also more likely to require a larger deposit.

50% of agents increased the rent for their last letting to a new tenant compared to 42% of landlords. For their most recent tenancy renewal 70% of landlords kept the rent the same compared to 63% of agents. A third (31%) of agents increased the rent for existing tenants, compared to 22% of landlords.

For their last letting, 61% of agents took a deposit of more than four and up to six weeks’ rent (45% of landlords took a deposit of this size). Almost half (47%) of landlords took a deposit of up four weeks’ rent (compared with 29% of agents).

Meanwhile, landlords are less willing than agents to let to certain groups, including those in receipt of Housing Benefit and Universal Credit, non-UK passport holders and families.

52% of landlords and 37% of agents reported that they would be unwilling to let to tenants in receipt of Housing Benefit. Similar proportions reported that they would be unwilling to let to anyone on Universal Credit (47% and 33% respectively).

The most commonly reported reasons for not letting to this group included the risk of delay in payment or unpaid rent and the risk that benefits would not cover the rent.

A quarter (25%) of landlords and 10% of agents are unwilling to let to non-UK passport holders. Reasons for this were not explored.

18% of landlords and 6% of agents are unwilling to let to families.

Most often this was because their property or properties were unsuitable for families and also because of the greater risk of damage to the property.

Landlords were asked how many rental properties they own in England.

  • In 2019, 45% owned one rental property, representing 21% of tenancies.
  • A further 38% owned between two and four rental properties, representing 31% of tenancies.
  • The remaining 17% of landlords owned five or more properties, representing almost half (48%) of tenancies,
  • The portfolios of individual landlords were considerably smaller than those of companies and organisations.
  • Most individual landlords (85%) owned between one and four properties, with just under half (47%) owning only one
    rental property.
  • The remaining 15% of individual landlords owned five or more
    properties.
  • By comparison, 46% of companies owned between one and four properties, with only 10% owning one rental property.
  • Just over half (54%) owned five or more rental properties, including 14% who owned 25 or more
  • Landlords with a Buy to Let mortgage were more likely than landlords with another kind of loan, or with no debt or borrowing, to own multiple rental properties.
  • About a third (37%) of landlords with a Buy to Let mortgage owned one property, with two thirds (63%) owning two or more properties.
  • Of landlords with another kind of loan, the proportion with one property alone increased to half (51%), while half (49%) owned two or more properties.
  • Among landlords with no debt or borrowing to fund their rental property, more than half (55%) owned one property and less than half (45%) owned two or more properties
  • Landlords who had been letting for longer tended to have larger portfolios. Of landlords with 11 or more years’ experience, 70% had two or more properties, compared with 48% of those who had been letting for four to 10 years and
    22% of those who had been a landlord for three years or less
  • Between 2010 and 2019, there has been a significant decrease in the proportion of landlords with just one property, from 78% to 45%. This decrease may in part be a function of the different methodology, e.g. such landlords may have longstanding tenants.

Ending a Tenancy and Tenant Eviction

  • Three quarters of landlords and agents were willing to offer longer tenancies of more than 12 months.
  • 40% were willing to offer longer tenancies.
  • An additional 38% of landlords and agents were willing to if there was a break clause in place to enable tenants and landlords to break the contract if required.
  • Landlords and agents who reported a tenancy ending within the last two years were asked why this tenancy (or these tenancies) had ended. The findings are reported for both landlords and agents together because agents are likely
    to be responding on behalf of a number of landlords that they represent and it is not appropriate to compare the responses of the two groups.
  • The most common reason, selected by half (50%) of landlords and agents, was that it was the end of the tenancy and the tenant decided not to renew. A quarter (25%) of landlords and agents reported that tenancies ended because the tenant moved out before the end of the tenancy
  • Other reasons for tenancies ending included the landlord or agent asking the tenant to leave (3%), the landlord or agent evicting the tenant (15%)

Eviction Numbers Increasing

Where landlords and agents reported that they had chosen to end a tenancy in the last two years either by asking the tenant to leave, not renewing a tenancy or evicting a tenant, they were asked to select the reasons for this

  • The most common reason for landlords and agents to end tenancies, selected by over half (58%) of landlords and agents, was that the tenant was in arrears.
  • Less than half (45%) of landlords and agents chose to end a tenancy because the property was not cared for.
  • Other reasons for ending the tenancy included to refurbish the property and relet it (18%), to sell the property (10%) and that the tenant had too many complaints about the property (13%)

Landlords and agents were asked what would encourage them to offer longer tenancies.

  • They most commonly reported that they would if it was easier to remove problem tenants (70%).

In most cases, landlords and agents report that it is the tenant’s choice to end a tenancy.

  • 50% of landlords and agents reported that, in the last two years, they had ended at least one tenancy because the tenancy ended and the tenant did not want to renew.
  • A quarter (25%) ended because the tenant had moved out before the tenancy had ended.
  • Meanwhile, 7% of landlords and agents asked the tenant to
    leave, 7% evicted the tenant and 4% decided not to renew.
  • The most common reasons for evicting, asking a tenant to leave or not renewing a tenancy were due to rent arrears (58%) or due to the tenant not caring for the property (45%).
  • In relation to the last tenancy that ended, 60% of landlords and 54% of agents returned the full deposit to the tenant. A quarter (24%) of landlords and 30% of agents returned some of the deposit.
  • Landlords and agents did not return the deposit (either in part or at all) due to damage to the property or contents (65% of landlords and 60% of agents) and to clean the property for the next tenant (65% of landlords and 65% of agents).

Profile of private landlords

This chapter presents findings on the types and characteristics of landlords, their finances, their motivations for becoming a landlord and their perceived role as a landlord. These questions were asked only of landlords and so this chapter does not include agents

Landlord types

  • Landlords were asked how they currently let their property. The majority (94%) let property as an ‘individual or a group of individuals’, with 4% ‘as part of a company’ and the remaining 2% as part of some ‘other’ organisation. (For track, The Landlord Association is not represented as an ‘other’ organisation. We are exempt from the options to avoid confusion when sumissing landlords as individuals when also part of a collective entity)

Landlord population by landlord type

  • Most (83%) tenancies were represented by individual landlords, with companies representing 13% and other organisations 4%,
  • In 2010, 89% of all landlords in England were private individuals, with 5% company landlords and 6% other organisation landlords.
  • Individual landlords represented 71% of all private rented dwellings, with companies representing 15% and other organisations 14%
  • Landlords were asked how many rental properties they own in England. In 2018, 45% owned one rental property, representing 21% of tenancies.
  • A further 38% owned between two and four rental properties, representing 31% of tenancies.
  • The remaining 17% of landlords owned five or more properties, representing almost half (48%) of tenancies
  • The portfolios of individual landlords were considerably smaller than those of companies and organisations. Most individual landlords (85%) owned between one and four properties, with just under half (47%) owning only one
    rental property. The remaining 15% of individual landlords owned five or more properties. By comparison, 46% of companies owned between one and four properties, with only 10% owning one rental property. Just over half (54%)
    owned five or more rental properties, including 14% who owned 25 or more,
  • Landlords with a Buy to Let mortgage were more likely than landlords with another kind of loan, or with no debt or borrowing, to own multiple rental properties. About a third (37%) of landlords with a Buy to Let mortgage owned one property, with two thirds (63%) owning two or more properties. Of landlords with another kind of loan, the proportion with one property alone increased to half (51%), while half (49%) owned two or more properties. Among landlords with no debt or borrowing to fund their rental property, more than half (55%) owned one property and less than half (45%) owned two or more properties
  • Landlords who had been letting for longer tended to have larger portfolios. Of landlords with 11 or more years’ experience, 70% had two or more properties, compared with 48% of those who had been letting for four to 10 years and 22% of those who had been a landlord for three years or less
  • Between 2010 and 2018, there has been a significant decrease in the proportion of landlords with just one property, from 78% to 45%. This decrease may in part be a function of the different methodology, e.g. such landlords may have longstanding tenants for whom they have not taken a
    deposit.

Age, ethnicity and time spent as a landlord

  • Individual landlords were asked questions about their personal characteristics and landlord journey
  • Landlords were, on average (median), 57 years old. This is older than the general population. At the time of the 2011 Census, the median age for the population of England and Wales was 39 years.
  • Over half (59%) of landlords were aged 55 or older, representing 62% of tenancies
  • In 2010, 70% of landlords had been landlords for 10 years or less, representing 48% of tenancies. The difference between 2018 and 2010 suggests that the average length of experience as a landlord has increased since then, but this could reflect changes in methodology

Financing & Buy to Let Mortgages

  • Compared with longer standing landlords, recent landlords were more likely to have bought their first rental property to live in themselves and less likely to have bought it with the intention of letting it. Over a third (37%) of landlords that had been a landlord for three years or less bought their first property to live in themselves, compared with 28% of those who had been a landlord for 11 or more years. On the other hand, half (49%) of those who had been a landlord for three years or less bought their first rental property with the intention of letting it out, compared to two thirds (58%) of those who had been a landlord for 11 or more years
  • Landlords who had bought or built their first rental property were asked about the sources of funding for this purchase or build. Almost three quarters (72%) reported using a mortgage, 37% used personal savings and 8% used an inheritance
  • Recent landlords were less likely to have used a mortgage to fund their first rental property, compared to longer standing landlords. Almost two thirds (63%) of those who had been a landlord for three years or less had used a mortgage. In comparison, around three quarters of those who had been a landlord for longer had used a mortgage (73% of those who had been a landlord between four and 10 years, and 75% of those a landlord for 11 or more years),
  • In 2018, 29% of landlords were employed full-time and 11% part-time. A third (33%) of landlords were retired. Less than a fifth (16%) of landlords were selfemployed (not as landlord), with a further 13% self-employed as a landlord
  • Over half of tenancies were represented either by landlords who were retired (28%) or those self-employed as a landlord (30%)

Property values and borrowing

  • Landlords were asked the approximate value of their total rental property portfolio. The average (median) total market value of landlord rental portfolios was £400,000. Nearly a quarter (23%) of landlords had portfolios they valued at less than £200,000. A further 36% had portfolios they valued from
    £200,000 to £499,999. Nearly a quarter (22%) had a portfolio they valued from £500,000 to £999,999, with the remaining 18% having rental property portfolios valued at £1 million or more
  • The longer the time spent letting, the more likely landlords were to have a higher value portfolio. Of those who had been a landlord for three years or less, only 15% had a portfolio valued at more than £500,000. This rose to 32% of those who had been letting for between four and 10 years and to over
    half (54%) of those letting for more than 10 years
  • The average (mean) estimated value per rental property for all landlords was £261,900 with the average house value £243,000
  • Landlords who reported using borrowing or loans to fund their rental property were also asked the approximate value of such borrowing. The average (median) value of loans or borrowing was £180,000. One in three (29%) landlords using borrowing had loans of less than £100,000, with a further 38% having loans of between £100,000 and £300,000. The remaining third (33%) had loans of £300,000 or more
  • The longer a landlord had been letting the higher the value of their loans or borrowing. Only 3% of landlords who had been letting for three years or less had borrowing of £500,000 or more. This rose to 12% for those who had been letting for between four to 10 years and to 27% for those who had been letting for more than 10 years
  • The median equity or net value of landlord rental portfolios was £220,000, calculated from the median value of landlord rental portfolios minus median value of loans or borrowing.
  • For those who had existing loans or borrowing, the loan to value ratio of the borrowing was calculated using the landlord’s estimate of their portfolio’s market value. The median loan to value ratio for these landlords was 50%.
  • Over a third (34%) of landlords with debt or borrowing on their rental properties had a loan to value ratio of 39% or less, with another third (32%) one of 40 to 59%. A quarter (25%) had a loan to value ratio of between 60 to 79%, with a further 9% having a loan to value ratio of 80% or more. Of these
    landlords, 4% had an estimated loan to value ratio of 100% or more,

Portfolio loan to value ratios for landlords with debt

  • Landlords were asked which, if any, types of loans or borrowing they currently have to fund their rental property. Over half (55%) of landlords had a Buy to Let mortgage, representing 61% of tenancies. More than a third (39%) of landlords had no debt or borrowing, representing 30% of tenancies. Smaller proportions had a commercial loan (4%) or a loan from family or friends (3%),

Extent and type of borrowing for funding of rental property

  • Landlords who had been letting for longer were more likely to have a Buy to Let mortgage. Of landlords who had been a landlord for three or less years, almost half (49%) had a Buy to Let mortgage. This increased to 58% of those who had been letting for between four and 10 years, and 54% for those letting for 11 or more years
  • Of recent landlords (three years or less), 43% had no loans or borrowing to fund their rental property, compared to 34% for those who had been a landlord for between four and 10 years and 42% for those landlords who had been letting for more than 10 years

Type of rental property currently let or managed by landlords and agents

  • Landlords with larger portfolios are more likely to be letting a wider range of property types. As such, the proportion of landlords with each property type increased with portfolio size
  • For instance, the most common type of property for landlords with portfolios of all sizes were terraced houses. A third (32%) of landlords with one property had a terraced house, while half (48%) of those with between two and four properties had at least one, as did 70% of those with five or more properties in their portfolio. However, the distribution of types of properties was similar for landlords with different sized portfolios

Gas and Boiler Issues in let property

  • Landlords reported a rise (10%) from 2018 in boiler repairs with 12% of property requiring a repair on a gas boiler within their let properties during 2019. Furthermore, an increase of 2% from 2018-19 required a replacement gas boiler (6%)

Types of Gas Boiler by replacement type

  • Types of gas boilers by replacement type
    • Combi – 44%
    • Regular – 40%
    • System – 16%

By regional breakdown

  • The most boiler repairs were needed in London with 6.08% of boilers estimated to have broken down during this period. This was closely followed by the West Midlands at 6.04% and the North East at 5.59%.
  • Boilers are least likely to break down in Yorkshire with 4.27%, Scotland at 4.38% and the North West at 4.79%.
  • These results, at an average of 5.1% nationally, suggests 30,000+ boiler repairs were undertaken on property within portlofios managed by landlords under the guidance of The Landlord Association

Landlord Insurance

  • up 12% on 2018, 79% of landlords reported having landlord insurance cover for their properties, by type popularity
    • Buildings Insurance
    • Contents Insurance
    • Boiler Care Cover
    • Public Liability Insurance
    • Landlord Emergency Cover
    • Rent Guarantee Insurance
    • Unoccupied Property
  • A further 18% of all landlords indicated that they were either thinking of or actively seeking to insure their properties currently uninsured, up 7% on the previous year
  • Landlords with a single property were less likely to have a insurance policy (68%) than those with a portfolio of two properties or more (87%)

Boiler Cover Insurance

22% of landlords indicated that they have boiler care cover (up 12% on 2018) suggesting that over 130,000 property are insured with some kind of cover to protect their boilers for repair and replacement

of those without boiler care cover, 15% suggested they were either thinking of getting cover or were actively seeking to get cover (90,000 properties).

Of the reasons given for not having boiler cover (1) Not enough time (2) too expensive (3) not important (4) Did not renew previous policy (5) portfolio cover options minimal (6) No gas in property (18%).

© TLA copyright, 2020. 

This survey may be republished in part or full without permission. If you require any further information regarding the collation of this survey or indeed any of the information and statistics included please email dean@landlordexpert.co.uk.

This document/publication is also available on our website at www.landlordexpert.co.uk. All rights reserved by The Landlord Association.

Thousands of renters could be evicted in June. Will the government protect them?

When the lockdown ends what will happen to tenants? Almost nine million households, more than a third of all families in Britain, rent from a private landlord, a council or a housing association.

Because of coronavirus, many are now in financial need. Nearly two million claims for universal credit have been made since lockdown measures were announced in the UK. Welfare claimants are entitled to payments equivalent to housing benefit. But, as a result of changes made to benefits over the last decade (like the bedroom tax and restrictions to local housing allowance), it is increasingly rare for housing benefit to pay all of a tenant’s rent.

Others, although ineligible for universal credit, are also in difficulty: because they have received a redundancy cheque that will soon be spent, or their self-employed grant hasn’t arrived yet. Then there are furloughed workers, paid now, but waiting for news of redundancies from their employer.

Right now, all possession hearings – the main step in evicting a tenant – are “stayed”. This is the legal equivalent of putting food in a freezer. The cases are still there, ready to be thawed out at any moment.

Where a tenant is behind with their rent, landlords can issue them with a notice instructing them to leave, but (for the moment) the tenant can ignore it. On 25 June the housing courts will reopen for business. Judges will have to determine thousands of stayed pre-coronavirus cases, and the even greater number of new claims for possession arising from the lockdown.

Ministers have grasped that hundreds of thousands of homes are at risk. Earlier this week the housing minister, Robert Jenrick, announced that the government was working closely with judges to draft a “pre-action protocol” for when the stay is lifted.

He told MPs that the protocol will “enable tenants to have an added degree of protection, because instead of embarking upon the eviction proceedings immediately, there will be a duty upon their landlords to reach out to them, discuss their situation, and try to find an affordable repayment plan”.

The problem with the protocol is that it is toothless – essentially depending on the benevolence of landlords.

The two most common ways landlords seek possession are under “section 21” and “ground 8”. Section 21 provides that where a landlord has complied with certain procedural requirements (like issuing a notice using the correct form and waiting for a prescribed time before applying to court) the court must order possession.

The statute does not require a landlord to have complied with the government’s proposed pre-action protocol. For that reason, even where landlords have rushed to issue proceedings, and have ignored requests from tenants to defer payments for a short time, judges will be required to approve evictions.

Ground 8 provides that where a tenant is in rent arrears (eight weeks if the rent is due weekly), both when the landlord serves a notice on them and when the hearing takes place, the court must order possession.

Again, the court takes no account of the landlord’s conduct; it focuses simply on the amount of the tenant’s arrears. In these circumstances, if the new protocol is as the minister describes it, it will not protect tenants at all.

There are alternatives. In last year’s general election, the Conservatives committed to abolish section 21 as part of their “better deal for renters”. The government reaffirmed that commitment in the Queen’s speech, announcing a renters’ reform bill to include the abolition of section 21. They should be held to that promise. As for ground 8, it too needs to be abolished. Or, if that is impossible, rescinded for such time until tenants have had a chance to reduce their debts once they’re able to go back to work.

Abolishing or rescinding ground 8 would not prevent landlords relying on other grounds of possession. But, without it in place, judges will be free to order possession only if reasonable – thereby giving effect to the tenant defences the government says that it wants in place. One further advantage of abolishing ground 8 is that courts can turn to other possession proceedings in which possession orders are made but suspended, while tenants are given the chance to repay arrears to a realistic plan.

Muddling on without the abolition of section 21 and ground 8 will lead to millions of people forced out of their homes. It will send those evicted scattering – some to stay with elderly relatives, some into local authority housing (although it is at breaking point) and many into homelessness.

The government accepts that street homelessness speeds the transmission of coronavirus: this is the grim calculation that underpins the government’s granting of resources to councils to house rough sleepers. Drifting into a future where huge numbers of people lose their homes needlessly would be just as dangerous – for those who are evicted, and for everyone else.

 David Renton is a housing barrister at Garden Court Chambers

Buy-To-Let Lenders Refresh Suite Of Products As Cost Of Landlord Borrowing Falls

New research from Property Master has found that the cost of buy-to-let mortgages has fallen year on year.

Lenders are continuing their support for individual and limited company landlords in anticipation of a busy few months ahead.

According to Property Master, five-year fixed rate buy-to-let mortgages for 65% loan-to-value (LTV) saw costs fall the most. Borrowers now save £48 per month on a £150,000 mortgage compared to 12 months ago.

Two-year fixed rates fell more modestly. The cost of a typical mortgage for £150,000 for 75% of the value of the property was down £25 per month year-on-year. The cost of a 65% LTV product fell by £19 per month.

The falling costs of buy-to-let mortgages are likely to continue. Lenders are reviewing and refreshing their buy-to-let ranges to support landlords keen to remain in the market but conscious of their squeezed profit margins.

Landbay reduces minimum income

Landlords can now access Landbay’s buy-to-let ranges with a minimum income of £15,000. The minimum property value is £75,000 for standard properties and HMOs in qualifying areas.

The lender has also reduced the minimum loan amount by £20,000 to £30,000. Further to this, the maximum standard property loan has increased to £2 million for up to 75% LTV mortgages.

Plus, landlords looking for an 80% LTV can benefit from their standard five-year rate available from 3.89%.

“These changes are part of our strategy to extend our product offering to an even wider range of borrowers, helping our partners support more landlords across the country.”

Support for limited company landlords

The Nottingham for Intermediaries has unveiled a new buy-to-let offer to support landlords restructuring to limited companies. Two-year fixes are now available at 2.76% with a £999 fee and at 2.79% with a 0.50% fee at 75% LTV.

Nikki Warren-Dean, head of intermediary sales at The Nottingham, said: “Judging from the conversations we’ve been having with our broker network, many landlords are considering structuring their portfolios on a limited company basis, if they haven’t already.”

She added that it is important to offer competitively priced products to suit landlords’ needs.

TSB offers landlords mortgage security

Another lender that is offering a refreshed BTL range is TSB. It has introduced its first 10-year fixed rate buy-to-let mortgage products, giving landlords the option of long-term security. For up to 60% LTV, borrowers can get a rate starting from 2.44%. With a 60-75% LTV, landlords can borrow for 3.19% upwards with a range of fee options.

With interest rates currently very low, especially for buy-to-let landlords, some will want the added reassurance of a long-term rate.

TSB has also reduced its rates for three and five-year fixed rate BTL products by up to 0.25%.

Beverley Bradford, TSB’s head of intermediary mortgages, said: “These changes, as well as the introduction of our new 10-year fixed buy-to-let mortgages, should go some way to offering peace of mind to those looking to fix their monthly payments for any length of time that suit their lifestyle.”

Lenders anticipate a busy April

Angus Stewart, chief executive of Property Master, said the company expects a busy few months.

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

Tax Relief Changes Come Into Play In April – This Is What You Need To Know

Under new rules being phased in by April 2020, landlords will progressively lose valuable tax relief on their buy-to-let mortgage costs. We explain what the changes mean for you.

What is buy-to-let mortgage interest tax relief? Since April 2017, the way landlords have to declare their rental income has started to change, meaning most will see their tax bills rise significantly. While borrowing money through a buy-to-let mortgage was once a major tax advantage, it’s no longer the case. This guide explains what changes are taking place, how they affect how much tax landlords have to pay. Video: how buy-to-let mortgage tax relief has changed for landlords Our short video explains the tax changes for landlords with buy-to-let mortgages.

Landlord mortgage interest tax relief in 2019-20 Since April 2017, tax relief on mortgage interest has been gradually phased out. By April 2020, you won’t be able to deduct any of your mortgage expenses from rental income to reduce your tax bill. Instead, you’ll receive a tax-credit, based on 20% of your mortgage interest payments.

This is less generous for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments under the old rules. The new system is being phased in over several years. In 2019-20, you can deduct one quarter of your rental income, while three quarters of your mortgage interest payments will receive the tax credit. As of April 2020, all mortgage interest will only receive the tax credit. For previous years:  In the 2017-18 tax year, you could claim 75% of your mortgage tax relief In the 2018-19 tax year, you could claim 50% of your mortgage tax relief.

Why the tax credit is bad news for landlords This new system will potentially increase your tax bill in two ways. If you’re a higher or additional-rate taxpayer, you won’t get all the tax back on your mortgage repayments, as the credit only refunds tax at the basic 20% rate, rather than the top rate of tax paid. Less obviously, you could also be forced into a higher tax bracket because you’ll need to declare the income that was used to pay the mortgage on your tax return. This could push your total income into the higher (£50,000 in 2019-20) or additional-rate (£150,000) tax brackets, depending on your income from other sources, such as your salary or pension.

Mortgage interest tax relief in 2020: an example Going back to our example of a landlord that charges £950 per month rental income, with mortgage interest payments of £600 per month.

  • They’ll pay tax on the full £11,400 rental income they earn
  • They’ll still pay £7,200 in mortgage interest
  • They’ll get a tax credit of £1,440 (£7,200 x 20%)
  • A basic-rate taxpayer will pay £840 – no increase
  • A higher-rate taxpayer will pay £3,120 – double the tax
  • The chart below shows how this is calculated.

Can landlords incorporate to keep their mortgage interest relief? This change in tax relief only affects private landlords – people who own their properties as individuals (or couples), rather than through a business. In theory, by setting up a business that owns their rental properties, landlords will be able to continue to declare rental income after deducting the mortgage. However, if you’re considering doing this is vital to research it thoroughly, as even with this tax saving you could end up far worse off.

There are a few reasons for this, but the main one is that mortgage rates for businesses are more expensive than for private landlords, which could cost more than you’d save in higher tax relief.

You’d also need to pay an extra round of stamp duty when you transfer ownership of the property to the business. You can use our calculator to work out your buy-to-let stamp duty bill.

Finally, if you incorporate your taxes will become more complex. Instead of paying income tax on your rental income, you’ll need to file taxes for your business, and pay corporation tax on your profits.

To receive the rental income, you’ll need to pay yourself a dividend. This will be taxed as income, but at a lower rate than if you’d received the income directly.

Tax issues for landlords with multiple properties

Buy-to-let landlords have been at the receiving end of several changes to the housing market in recent years.

Introduced under former Chancellor George Osborne, the tax and regulatory reforms were part of a shake-up announced in his Autumn Statement 2015 and have hit landlords particularly hard.

The changes came as the government faced pressure to respond to soaring house prices and a rental market that was largely perceived to work in favour of landlords rather than tenants.

Phased in

Among the changes brought in was an additional 3 per cent stamp duty surcharge which was introduced in April 2016. There has also been the phased abolition of mortgage interest rate tax relief for landlords since April 2017, with the final phase still to come in April 2020.

David Hollingworth, associate director, communications at L&C Mortgages, explains: “From April 2020 landlords will only be able to claim basic rate relief on any mortgage interest costs and will have been having to gradually adjust to what, for many, will have resulted in higher tax bills.”

The rules around lending were also tightened, with the Prudential Regulation Authority bringing in more stringent affordability testing for those borrowers with buy-to-let ambitions.

Mr Robins says that the main tools being used have been effective in making investment in residential property less profitable for landlords.

“In most cases, landlords now have to pay stamp duties at a higher rate than individuals buying property to live in personally,” he explains.

“In England, Wales and Northern Ireland, landlords face a 3 per cent supplementary charge, and in Scotland this is 4 per cent.”

Company structure

Mr Robins points to multiple dwellings relief (MDR) as an important relief from higher stamp duty rates and as being helpful for landlords building a property portfolio.

He explains: “Under MDR rules, SDLT (stamp duty land tax) and LTT (land transaction tax) is charged on the average price of all of the properties purchased, using residential tax rates including the supplementary charge. In Scotland, bulk purchases qualify for MDR without suffering the supplementary charge.

“In England, Wales and Northern Ireland, this means that landlords need to think carefully about whether it is better to pay stamp duty on the average property price at higher tax rates, or on individual prices at lower tax rates.“

Aldermore relaunches buy-to-let product

Aldermore Bank has relaunched its buy-to-let proposition, which includes a fee-free 5-year fix at 3.48% for individual landlords.

The maximum loan limits have been increased from £600,000 to £1m to 75% LTV, and from £400,000 to £500,000 to 80% LTV.

Meanwhile maximum terms have been extended from 35 to 40 years.

Damian Thompson, group managing director of retail finance, Aldermore, said: “Landlords play a pivotal role in the UK housing market and, as the Private Rented Sector continues to expand, it is important they have options and flexibility, so they can continue to provide for tenants.

“We are pleased to announce our latest commitment to supporting landlords, providing them with more choice, more flexibility and more options.

“We know landlords have varied and often complex portfolios that frequently do not fit in the boxes other lenders require them to fit in.

“We have listened to feedback from landlords and intermediaries, and this expansion of options gives us more opportunity to support landlords to find the mortgage that is right for them, whatever their circumstances.”

Regarding defaults, small settled defaults from 13 to 36 months are now accepted up to £500.

Meanwhile there are new products for portfolios up to £5m, new rate and fee options, and reduced HMO and multi-unit freehold products.

Martin Reynolds, chief executive of Simplybiz, said: “The number of criteria and product structure changes that Aldermore have made is a demonstration of the positive attitude they have for the buy-to-let market.

“It should also be seen as a positive view of the resilience and long-term requirements of the market.

“The ability to offer a longer term, higher loan sizes and loan purpose coupled with the new product flexibility will be welcomed by the intermediary market and will create new opportunities for their landlord clients. Well done Aldermore.”

Uinsure receive 5star Defaqto rating

Uinsure has been awarded a Defaqto Five Star rating for the seventh consecutive year.

The provider’s home insurance product has been given Defaqto’s highest possible rating since 2014, with its buy-to-let/landlord Insurance product having done the same since 2015.

In addition to its Defaqto Five Star ratings, Uinsure has also received the same rating from Moneyfacts for its home insurance and home emergency products.

Paul Kelly, director of product development at Uinsure, said: “We are delighted to again be awarded the highest possible ratings from Defaqto. Ensuring we’ve got a fantastic range of high quality products is always the priority for Uinsure, and we haven’t stopped in ensuring that our GI proposition leads the way.

“Receiving the highest quality Five Star rating for our home insurance, home emergency and landlord Insurance is testament to our quality products and exemplary service.”

In the Event of Disaster: 5 Areas Covered by Landlord Insurance

Those who want to start renting out homes or who want to purchase a small duplex or apartment building to lease to tenants will want to ensure they do not have any issues that will cause their income to disappear. One of the best ways to protect the investment is to have an insurance policy. If anything does happen, they’re protected against financial losses. Some of the coverage a landlord insurance policy can provide includes the following.

Loss of Income

If the apartment is deemed uninhabitable while a tenant is there or after they leave due to mold, severe property damage, or other issues, the landlord may be protected against the loss of income while repairs are completed. Companies like Roger Butler Insurance will offer different amounts of coverage against loss of income, so it’s a good idea to look into how much it can cover if something happens. This could help the landlord avoid significant losses if they have to spend months rehabilitating the property.

Liability

Landlords can be held liable if a tenant or guest is injured on their property. For instance, if the railing on the stairs isn’t properly secured and a tenant using the railing ends up falling, the landlord may be required to pay the tenant’s medical bills. Liability protects the landlord and covers the medical and other expenses of tenants or guests injured on the property. Depending on the insurance and the situation, it may also cover legal assistance for a landlord who is sued for negligence because of an injury on their property.

Property Damage

Natural disasters can cause significant property damage that could be expensive and time-consuming to repair. If this happens, the landlord can use their insurance policy to cover the damages done during the natural disaster. It is important to note that most insurance policies do not cover flooding under property damage as flooding insurance is purchased separately. However, any other damages caused by a natural disaster should be covered under the policy.

Emergencies

Landlords who do not live locally may want to purchase extra insurance to cover certain emergencies. This helps to cover their travel expenses if they need to travel a significant distance to handle emergency repairs for the property. While landlords who live far from their property may have other options like getting a property management company, this coverage can help as well.

Flooding

Flooding can be covered by landlord insurance but, as mentioned previously, it does often need to be purchased separately. In most cases, flooding insurance is relatively inexpensive, so it’s worth considering, especially if the property is in a flood zone. If there is a natural disaster or other issue that causes flooding, this addition to the policy can help cover the repairs needed to restore the building.

If you’re considering becoming a landlord or you already own a building that has tenants, landlord insurance is something necessary. While you may not be required to have it, there are a lot of things that can’t be predicted that could end up costing you a ton of money. Landlord insurance can help you protect against it. When you’re buying a policy, look for the coverage included here as well as find out what other coverage is available to ensure you have as much insurance as you might need.

Leeds Cuts Fixed Rated Buy To Let Mortgage

Leeds Building Society is trimming rates on two of its buy-to-let deals from tomorrow.

At 60 per cent loan-to-value its two-year fix is reducing from 1.49 per cent to 1.44 per cent, with a £1,999 fee.

At 70 per cent LTV it is cutting its two-year fix from 1.65 per cent to 1.59 per cent, with a £1,999 fee.

For landlords needing to borrow up to 80 per cent LTV, Leeds recently launched a two-year fixed 2.94 per cent with a £2,499 fee, which it says is the cheapest in the market.

All three products come with a free standard valuation and legal fees.

Leeds Building Society director of product Matt Bartle says: “Our experience and expertise in the buy-to-let market means we’re well-positioned to meet the evolving requirements of landlords.

“We know that many landlords are actively managing their portfolios, with their choice of mortgage deals playing an important role in maximising yield.

“These rate reductions follow the launch of our two year 80 per cent LTV product, which continues to offer the lowest rate on the market.”

Is this a buy-to-let loophole? New mortgage means landlords can qualify with less rent WITHOUT locking in for a full five years

Landlords struggling to make the maths work on a new mortgage are being offered the chance to qualify for the easier rules a  five-year fixed rate delivers – but without locking in for that full period.

Strict rules limiting the amount landlords could borrow on a buy-to-let mortgage came in almost two years ago, but now one lender has come up with a product that eases the amount of rent a landlord must earn without locking them in for five years.

Since 2017 landlords have had to choose between committing to a fixed term mortgage deal for at least five years or facing stringent affordability rules which limit how much they can borrow in relation to their rental income.

The new stricter affordability rules only apply to fixed rate terms of less than five years

The new stricter affordability rules only apply to fixed rate terms of less than five years

But a new five-year fix from lender Foundation Home Loans allows borrowers to leave after three years without facing any early repayment charges – effectively giving them the flexibility of a three-year fix without the tougher affordability rules.

The deal comes in two forms, up to 65 per cent loan-to-value at 3.30 per cent and up to 75 per cent loan-to-value at 3.55 per cent – both quite expensive compared to existing deals on the market.

So who might this deal be right for, and is it worth the extra cost?

Why will this allow landlords to borrow more?

Five-year fixes have become one of the go-to mortgage types for landlords in recent years as less stringent affordability tests on these deals mean borrowers can take out larger loans.

A lender assesses whether a potential borrower is suitable for a loan by putting them through what is called a ‘stress test’.

As part of this the borrower has to be able to rent out the property for a minimum amount, which is proportionate to the size of the loan taken.

The rules, brought in by the Bank of England two years ago, force lenders to require more rental income cover than they did previously to qualify for a mortgage.