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Mortgages

Buy to Let: Is Now the Time to Invest?

For several years now, the United Kingdom has been widely regarded as a haven for buy to let investments. From casual investors with just a single rental property to those with extensive portfolios spanning the British Isles, skyrocketing rent prices have attracted investors from near and far.

The coronavirus crisis and its effects on the UK economy have somewhat diluted the appetites of potential investors. The same can also be said for the major reforms introduced by the government over the past three years, paving the way for a more hostile environment for landlords in the UK.

Though surprisingly, there are those who firmly believe that now could be the perfect time to consider a buy to let investment. Whether you are considering your first buy-to-let venture or looking to expand your existing portfolio, the aftermath of the Covid-19 pandemic could be quite beneficial for some.

Pent Up Demand

For one thing, real estate experts across the UK are expecting a vast wave of pent up demand to be released over the coming weeks and months. Those unable to move due to mandatory lockdown and business closures are now free to put their plans into action, which could see demand for rental properties soar and average rents spike as a result.

It’s also widely predicted that impaired job prospects and economic uncertainty for many will drive up demand for rental properties. It’s likely to be some time before the British public have the financial confidence needed to make major purchase decisions, further increasing demand for rental properties.

All of this is likely to be compounded by the difficulties many will encounter in both raising the funds necessary to qualify for a mortgage and getting their applications approved by major lenders. Use our Mortgage calculator UK to work out how much a mortgage would cost you.

Cheap Properties, Low Interest Rates

Most had expected property prices to plummet during the height of the coronavirus crisis, but this turned out not to be the case. Instead, they continued to climb at a slower pace than normal, indicating a potential spike to follow when some semblance of ‘normalcy’ returns over the coming months and years.

This means that for the time being at least, property values are lower than would have been expected at this juncture in 2020. In addition, it is now more or less certain that interest rates (and mortgage rates as a result) will remain extremely low for the next decade at least.

For established landlords and first-time investors alike, this could add up to a golden opportunity.

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Mortgages

Six-Month Right to Buy Receipts Repayment Extension Confirmed

As part of the government’s on-going response to the coronavirus crisis, councils across England are to be offered an additional six months to spend the funds raised via Right to Buy sales. First reported by Inside Housing, the government has confirmed the six-month extension which will provide local councils with additional time to spend Right to Buy funds, prior to returning the money to the treasury.

The Ministry of Housing, Communities and Local Government (MHCLG) informed councils across England that the decision had been made due to the coronavirus crisis having “halted or slowed down housing development” in some instances.

Councils have been invited to enter into a new agreement wherein the spending deadline for Right to Buy receipts will be extended to December 31 this year.  This means that those taking advantage of the extension will have six additional months to make use of the funds raised via Right to Buy home sales during the 2017/2018 period.

Previously, the deadlines by which the funds would be expected to be returned to the treasury would be June 30 and September 30 this year. “By rolling up the next two deadlines to the end of the calendar year, the department’s objective is that more will be spent on replacement social housing,” read an extract from letter the MHCLG directed at all applicable councils across England.

A Welcome Extension at a Difficult Juncture

Right to Buy receipts can normally be held by local councils for a maximum of three years, during which the funds can be used to build replacement affordable housing. Otherwise, the money must be returned to the Treasury at the end of this three-year period.

Originally, the Local Government Association (LGA) had requested for the three-year allocated period to be increased to five years or more, due to concerns that there will be insufficient time to make use of the funds generated due to coronavirus-related complications.

However, the leader of Swindon Council and spokesperson for the LGA, David Renard, welcomed the government’s decision to offer a shorter extension, though stated that the group would continue to push for more time.

“We are pleased government has listened to our call for councils to be given an extension to the time they are allowed to spend money from Right to Buy sales,” he said. “With the building of new homes delayed or stopped altogether by the coronavirus crisis, many councils have been concerned that they will not have the opportunity to spend Right to Buy money on replacing much-needed homes sold under the scheme,”

“While we continue to push for a longer extension, this is a step in the right direction and will go some way to allowing councils more time to replace these homes, and make sure we can provide desperately needed social homes to those who need them.”

Though often criticised for its imperfections, the Government’s Right to Buy scheme continues to grow in popularity, having recently recorded a 4% increase in applications year-on-year.  Council tenants who qualify under the scheme are currently offered discounts of up to £82,800 (increasing to £110,500 in London) off the market value of their home, in accordance with their length-of-tenancy at the time.

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Judge Declares DSS Exclusions by Private Landlords ‘Unlawful’

For the first time, a judge in the United Kingdom has ruled that the exclusion of people on housing benefit by private landlords is discriminatory and unlawful.  The court ruling was heralded as “momentous” by those campaigning for change, following a complex legal battle involving a single mother-of-two made homeless due to the discriminatory policies of a letting agent.

In an interview with BBC News, the woman (whose identity remains protected) explained that after being evicted by her landlord on the basis of a “no fault” eviction, subsequent agents were unwilling to consider her case.

“I was shocked and found it very unfair that they wouldn’t even give me a chance,” she said.

“I had excellent references from both my landlords of the last nine years as I’ve always paid my rent on time and I had a professional guarantor,”

“I could have paid up to six months’ rent in advance because my parents lent me the amount,”

“When the letting agent wouldn’t take me because of a company policy, I felt offended that after all those years when I have prided myself on paying my rent, paying my bills, being a good tenant, it just meant nothing,”

“When I realised I was going to be homeless because I couldn’t find anywhere, I felt sick to my stomach.”

Her case was subsequently taken on by housing charity Shelter, which has assisted hundreds of people faced with similar discrimination. Simply because she was on housing benefits, the mother of two was considered unsuitable for private property rental and subsequently rendered homeless.

A Victory for Common Sense

Her case was ultimately heard by District Judge Victoria Mark in York County Court, who went on to reach the landmark ruling on July 1.

“Rejecting tenancy applications because the applicant is in receipt of housing benefit was unlawfully discriminating on the grounds of sex and disability,” was the ruling of the judge, meaning that the individual’s exclusion directly contravened the Equality Act 2010.

Speaking on behalf of Shelter, chief executive Polly Neate welcomed the ruling and suggested that it may pave the way for a more inclusive future for the private rentals market.

“This momentous ruling should be the nail in the coffin for ‘No DSS’ discrimination,” she said.

“It will help give security and stability to people who unfairly struggle to find a place to live just because they receive housing benefit.”

Widespread Discrimination

Evidence suggests that the vast majority of DSS tenants fulfil their financial obligations and care for their rented properties no differently than non-DSS tenants. However, a survey conducted on behalf of Shelter suggested that at least two-thirds of private landlords in the UK discriminate against those on housing benefits.

“This is the first time a court has fully considered a case like this,” commented Shelter solicitor Rose Arnall.

“It finally clarifies that discriminating against people in need of housing benefits is not just morally wrong, it is against the law,”

“This sends a huge signal to letting agents and landlords that they must end these practices and do so immediately.”

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