Prior to the government’s decision to more or less declare war on private landlords, buy-to-let was a safe haven for investors. If not, a veritable goldmine for those who made the savviest moves. But it wasn’t to last, as sweeping tax reforms hit current and prospective landlords hard, removing much of the appeal from the sector as a whole.

More recently, Chancellor Rishi Sunak announced a temporary stamp duty adjustment. Detailed in early July, the new policy would see the threshold at which homebuyers are required to pay stamp duty increase from £125,000 to £500,000. Coupled with comprehensively affordable mortgage deals and the easing of eligibility requirements among many major lenders, things could once again be working in favour of landlords.

But does this mean that now is the right time to consider a buy-to-let investment? Or do these potential incentives for landlords simply not go far enough? Use our UK mortgage calculator to find out what kind of mortgage suits you best and the exact costs.

Sizeable stamp duty savings

In the wake of Chancellor Rishi Sunak’s stamp duty break announcement, some of the UK’s leading buy-to-let brokers experienced enormous spikes in both website visits and client inquiries. Likewise, both Strike and Zoopla reported increases of up to 15% in the number of people looking to buy homes or considering buy-to-let investments.

The prospect of saving thousands of pounds on stamp duty apparently piqued the interests of once-reluctant investors.

It’s important to note that landlords will still be required to pay a flat 3% surcharge on buy-to-let properties. This means that on a £300,000 investment property, the usual stamp duty of £14,000 would be reduced to a much more manageable £9,000.

Meanwhile, many lenders have begun both reinstating their buy-to-let mortgage products and improving the competitiveness of their deals. Qualifying is becoming easier, and buy-to-let products are currently available with rock-bottom interest rates, making them an appealing prospect for those who act fast.

Particularly in key locations outside the capital, the North West, for example, has seen year-on-year rent price gains for June of more than 5%.

Ongoing uncertainty

Unfortunately, landlords and private renters alike are being forced to contend with a period of ongoing and indefinite uncertainty. Potential job losses and income reductions in particular are prompting movers and investors alike to think twice about making any major decisions for the time being.

Hence, basing buy-to-let investment decisions purely on stamp duty reductions isn’t considered advisable by most real estate experts.

A number of mortgage business owners feel that many will jump at the chance to pick up investment properties before the offer expires, while stating that buy-to-let can still be a valuable vehicle for those who get it right.

“Landlords will rush to buy homes before the stamp duty holiday ends in March next year, after which I think there will be a natural drop in activity,” he said.

“The UK is bracing itself for a slowdown in the economy, so I think it will be 2022 before the market rebounds again, assuming the taxman has no more nasty surprises.”

“It may never be the golden goose it once was, when amateur investors made easy money, but for the professional landlord, buy-to-let is still a profitable venture.”

Recent months have seen most major lenders become increasingly reluctant to offer high LTV mortgages, primarily due to the economic uncertainty brought about by the COVID-19 crisis. As life slowly begins to show signs of normality once again, some of the nation’s leading lenders are once again introducing higher LTV home loans.

Nationwide in particular appears to have first-time buyers in its sights, having for the first time in months begun offering 90% LTV mortgages.

Affordable and accessible borrowing

Exactly as the name suggests, a 90% LTV (or Loan to Value Mortgage) is a home loan offered to the value of 90% of the property’s total purchase price. The remaining 10% is being picked up by the buyer by way of a deposit.

In a typical working example, this would mean that a 90% mortgage on a £200,000 property would be offered to the value of £180,000, with the remaining £20,000 being the initial deposit requirement from the buyer.

The vast majority of first-time buyers have traditionally favoured 90% or even 95% LTV mortgages, due to the difficulties most encounter when attempting to put together a deposit. Over the past few months, most lenders have been unwilling to offer anything more than 80% or even 75% LTV on home loans for first-time buyers, meaning deposits of 20% or 25% are payable.

On the same £200,000 property, this would mean coming up with a deposit of £40,000 or even £50,000—the kind of cash most first-time buyers simply cannot save in a reasonable time.

There are no immediate signs that the return of the 95% LTV mortgage is imminent, though the reintroduction of the 90% mortgage has come as welcome news to first-time buyers across the UK. Work out what a mortgage would cost you using our UK mortgage calculator.

Leading the charge

Nationwide is so far leading the charge for affordable and accessible borrowing, having announced that its 90% LTV mortgage product is once again available as of July 20. Experts believe that the flexibility of major banks and lenders will play an important role in restarting the housing market and the wider economy in the wake of the COVID-19 crisis.

Speaking on behalf of Nationwide, Mortgage Director Henry Jordan stated that the decision had been made on the back of Rishi Sunak’s recent announcement regarding the temporary cut to stamp duty tax. Initial signs of housing market activity returning to pre-Covid levels are also giving lenders the confidence to offer more competitive deals for first-time buyers and existing homeowners alike.

In addition, Nationwide stated that there will be no initial limitations placed on the number of 90% LTV loans available or the loan amounts on offer for those who qualify.

Stringent eligibility checks

Though the reintroduction of the 90% mortgage is welcome news for buyers at all levels, applicants can still expect comparatively stringent eligibility checks when applying with major lenders. Particularly where proof of income and credit history is concerned, most mainstream lenders remain unwilling to take chances during the current period of economic uncertainty.

Whether you are planning your first home purchase or considering relocation, working with an independent broker could save you time, effort, and money. Particularly if you have concerns regarding your credit history or your ability to provide comprehensive proof of income, it is advisable to apply via a specialist broker rather than approaching any mainstream lender directly.

The Financial Conduct Authority (FCA) is the body responsible for ensuring businesses and consumers in the UK are provided with honest and accurate financial advice on key financial matters. Unfortunately, a newly published review of equity release advice suggests that many service providers are not fulfilling their obligations.

Significant efforts have already been made to ensure prospective equity release customers are offered the frank and objective advice needed to make sound decisions for their financial futures. Most established and reputable providers are doing just that, but the report published by the FCA indicates that further progress must be made.

Much of the issue has been attributed to the fact that the sector has experienced such rapid growth over the past few years. The coronavirus crisis has resulted in a temporary slowdown, but the figures confirm that more people than ever before are considering equity release. This growing demand is being responded to by a rapidly evolving specialist lending sector, which is proving difficult to oversee and regulate effectively.

The importance of in-depth advice

Entering into an equity release scheme is one of the most important financial decisions a typical homeowner will ever make. The type of scheme entered into (along with the terms and conditions of the deal) will have a significant and permanent impact on the customer’s financial future. Nevertheless, there will always be those who attempt to rush equity release applicants into making a quick decision, purely for their own financial benefit. See whether a mortgage would benefit you using our mortgage calculator in the UK.

The establishment of the Equity Release Council (which has improved its services significantly over the past few years) has helped, providing new and existing service providers alike with professional advice, including a helpful ‘adviser checklist’. Though it remains the responsibility of each individual adviser and provider to ensure they operate with their customers’ best interests in mind,

Outlined below is a selection of just a few of the more important points highlighted by the FCA, aimed at those providing support for equity release products and services:

• Obtaining the necessary information from a client to assess their situation and suitability for equity release is not the same as asking them to complete a form.
• Equity release is often entered into (or considered) without careful consideration of the potential consequences and can be an emotive subject.
• The FCA expressed concern that advisers do not always actively challenge the thoughts and assumptions of clients, where they may be inaccurate or misguided.
• Alternative options to equity release should always be discussed openly and honestly where relevant, particularly if they could be more suitable for the client’s needs.
• In instances where equity release is both appropriate and recommended, the adviser should be able to explain why it is a better choice than the alternative options available.
• Where clients have significant on-hand savings they would simply prefer not to touch, the potential benefits of doing so as an alternative to equity release should be discussed.
• The full costs, risks, and potential inheritance issues associated with equity release should be discussed frankly, openly, and in an uncomplicated manner.

Whether you are interested in releasing the equity tied up in your home or simply looking to discuss your financial future in more detail, we would be delighted to provide you with an obligation-free consultation.

Contact a member of the team at UK Property Finance anytime for more information.

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 surprising, 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 has 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 in the 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.

As part of the government’s ongoing 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. As 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 a 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 affordable replacement 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 that the three-year allocated period be increased to five years or more due to concerns that there would 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 he stated that the group would continue to push for more time.

“We are pleased the 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 towards 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.