I wasn’t surprised to see multiple doom and gloom articles in the press last week following the Budget. Headlines like “Four-pronged attack on buy- to-let investors will net the Treasury almost £12bn by 2024”.
However in amongst all the doom mongering I did spot a more positive article pointing to ‘light at the end of the tunnel’ – ie that even though the buy-to-let sector are being hit by higher taxes, lenders are competing hard to offer cheaper mortgages, often not much more expensive than the lowest residential fixed rates. Here are some short form highlights from that article:
THE ARRIVAL OF CHEAPER BTL RATES
*Data released by the banking trade body UK Finance shows that the number of new buy-to-let mortgage completions was down by 13% in the year to August. This means that the remortgage market has become the new battleground for banks ie they are cutting rates to attract existing landlords to remortgage.
*Leeds Building Society has launched the Easy Start Mortgage which offers landlords 3 a month of interest free period before reverting to a 2.82% for the remainder of the 5 year fixed term.
*The lowest rate is a two year fix from Sainsbury’s bank at 1.4%
EASING OF LENDER REQUIREMENTS
*Most lenders require monthly rental income to be 125% of the mortgage payment but some banks are starting to lower this with Nat West leading the way with the lower requirement of 100% coverage for landlords with income of £75K+ (whether this is from property or not).
*Age limits – Many lenders stipulate that customers have to be 75 or under by the end of the mortgage, however smaller lenders are beginning to remove the maximum age limit making it easier to hold a buy-to-let property as an income generating asset in retirement
NEW ENTRANT CUTTING APPLICATION TIME TO 24 HOURS
*New entrant Molo Finance will offer buy-to-let mortgages through a mobile phone app and would be able to make formal offers within 24 hours of application vs the industry standard of 18 – 40 days. See more here https://molofinance.com/
So, as you can see, definitely not all bad news, and there were plenty of positives to come from the budget, (as summarised in last week’s post, if you missed it you can look up HERE), particularly for those choosing to invest in commercial property and serviced accommodation.
One other legislation related snippet from this week’s reading to share was an article from YPN on this topic:
SPENDING MONEY ON PROPERTY REPAIRS TO OFFSET THE IMPACT OF SECTION 24
In short, spending money on necessary repairs can mitigate the impact of section 24 for private landlords who will be pushed into the higher tax rate of 40%. By way of a quick example, for a basic rate tax payer the tax benefit of a £10K refurb before section 24 was £2K (ie 20% of £10K that could be offset). With Section 24 in full force, if the landlord is pushed into the higher rate of 40%, the tax benefit of that £10K refurb is £4K.
So it’s well worth timing larger repairs with the phasing of Section 24.
EXAMPLES OF REGULAR REPAIRS THAT CAN BE OFFSET AGAINST REVENUE
*Replacement of kitchens and bathrooms
*Decoration and replacement of carpets
*Upgrading of glazing, plumbing, electrics
*External work to improve kerb appeal
*Replacing boiler
All to say that with disruption comes opportunity. Have a great week ahead.