MORTGAGES: Technology brings transparency to the buy-to-let market

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It is estimated that only one in three millennials in the UK will ever own a home. Whilst property prices have soared by an average of 152 per cent, the average household income has only risen by 22 per cent.

The buy-to-let property market presents significant opportunities for landlords and investors to grow their investment portfolios. The average rent on newly let property outside London has risen by 6.8% in the last year. 

But the buy-to-let market has been accused of being slow and lacking transparency. Brokers have criticised the technology strategy of traditional lenders like high street banks for having a lack of transparency.

The emergence of disruptive technologies in the buy-to-let market promises to improve the transparency and efficiency of lenders, borrowers and brokers. But it’s small, independent innovators that are leading the way.

Brokers criticise big finance

Financial investment is notorious for its lack of transparency. A study published by the Financial Conduct Authority (FCA) revealed the lack of clarity prevented 30 per cent of consumers from being eligible for favourable mortgages. 

Brokers often lament the ‘friction‘ that is inherent in the mortgage application process and do not feel large lenders are tackling the issues efficiently. Smaller lenders are also hampered by the increased amount of paperwork involved. There is little coherence between borrowers and lenders.

Technology has the potential to make the UK property market more transparent than it’s ever been.

Intermediary tools developed by independent third parties provide solutions that make reliable information readily available. More transparency will also mean that consumers will be able to find buy-to-let mortgages that fit their financial capacity.

Improved data glow

Digital technology is better at recording data and keeping a history of transactions. With a broader scope to access financial histories, lenders are able to assess a borrower’s suitability for a loan quickly.

Systems on both sides of the fence exchange accurate data. Lenders should be obligated to provide transparency with regard to hidden fees. When brokers are involved, it is often the case that cost margins are passed on to the borrower. 

Innovations in the buy-to-let market accurately evaluate buy-to-let mortgages to ensure borrowers can meet lending criteria and lenders can provide mortgages that meet the borrower’s circumstances. 

Third-party technology

While large lenders are failing to deliver efficient solutions in the buy-to-let market, third party innovations provide platforms that do.

For example, Pitch 4 Finance, has designed a platform that puts borrowers directly in touch with lenders that meet their criteria.

The platform provides instant criteria matching, real-time application updates, tracking and greater exposure for users. Borrowers have access to all lenders in the market which enables them to find deals that are more suited to their needs. 

Independent third-party platforms also benefit small lenders and allow them to compete with traditional high street banks. And with consumers demanding more transparency, they may turn to small lenders in search for the most cost-effective deals.

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Isle of Wight mulls EVEN bigger crackdown on rogue landlords and PRS

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The Isle of Wight Council is mulling proposals to crack down on rogue landlords and introduced much strong regulation of the private rented sector overall.

During a sometimes fractious meeting, councillor Richard Quigley highlighted the current housing emergency and asked whether it should investigate new measures including a private renters’ association and private renters’ charter, voluntary landlords’ register so private tenants can choose to rent from responsible landlords, and tougher enforcement against rogue landlords.

He also suggested using Section 106 powers to ensure all new builds are the buyer’s principal residence – rather than second or holiday homes – and a limit on the number of Airbnbs that offer an entire property for rent.

The crackdown comes despite the IoW council agreeing to bring in tough new civil penalties of up to £30,000 to use within its 17,000 household-strong rental sector just four weeks ago.

These will be applicable when landlords fail to comply with improvement notices, for offences in relation to HMO licensing and also contravening an overcrowding notice.

Deputy leader, councillor Ian Stephens (pictured), promised: “We are going to work together on [Councillor Quigley’s proposals] and I can definitely say that we’re taking all those elements forward in a positive way…which we will do because we want to build housing, we want to rent housing, we want to house our Island homeless.”

However, chairman of the council, councillor Geoff Brodie, said he had received a similar response to a question and added: “It doesn’t mean anything until you deliver, and I suggest you give a written reply to councillor Quigley and share it with the rest of the council.”

One unusual observation made during the meeting was that Secretary of State for housing Michael Gove has a relative living on the island, working and living there as a GP.

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Tenant refusing to leave and give electrician access?

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A difficult family is refusing to leave after a S21 and issued court proceedings and waiting for their response to see if they file a defence.

I need the EICR certificate, and they won’t let the electrician upgrade the rewire as this is inconvenience for them.

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BREAKING: New Welsh alliance to force through rent controls

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Rent controls have become a step nearer in Wales following the country’s two main political parties revealed plans to form a ‘lite’ coalition, it has been reported.

Labour and Plaid Cymru are expected to reveal their new alliance today after discussions over the summer on key policies they would like to collaborate on, including rent controls.

Other policies they will work on jointly include free childcare, free school meals for all primary school pupils, the creation of a national care service, replacing council tax and measures to tackle second homes.

Labour’s deal with the nationalists, which does not go as far as a full-blown coalition, will give the Welsh Labour government headed up by First Minister Mark Drakeford (pictured) more voting power to push through these measures.

Labour is the largest party within the Senedd but does not have an operating majority, a problem that the Plaid Cymru deal helps solve.

ITV has reported that the deal is strongly opposed by the Conserverative party in Wales, who have claimed it will lead to ‘constitutional chaos’.

The NRLA has been campaigning to head off the rent controls proposals, which pre-date today’s announcement, saying: “Evidence from across the world shows rent controls do not work.

“They make it harder for renters to find an affordable home, encourage rent rises, see housing conditions deteriorate and can lead to a reduction in the overall number of homes to let as landlords leave the market.

“We would encourage the Welsh Government to resist any moves to introduce them.”

During the last election in England, the Labour party backed rent controls, as does London mayor Sadiq Khan.

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Housing charity blames homelessness on landlords despite lower evictions

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Homeless charity Crisis has continued attacking landlords around the country for ‘rising evictions’ despite government data showing that recent repossessions are much lower than in 2019.

Crisis put out its national statement with the headline ‘207% increase in landlord possessions’ on 11^th November following the government’s announcement but is still sending out press releases to local newspapers and websites, putting the blame squarely on landlords.

Ministry of Justice statistics for July to September show there were 4,853 landlord possessions across England and Wales, a 207% increase compared to the previous quarter when there were 1,582 possessions, but 35% lower compared with the equivalent quarter in 2019.

Damaging

However, Crisis chief executive Jon Sparkes says the figures make clear how damaging it was for the UK government to end the eviction ban without providing sufficient support for renters who had built up arrears in the pandemic. 

He adds: “More and more people who lost their jobs and had their lives turned upside down are now being forced into homelessness.”

Meanwhile, the National Residential Landlords Association has analysed the latest data which shows that the number of cases brought to county courts in England and Wales in the third quarter of the year – off the back of a Section 21 notice – fell by 55% compared to the same quarter in 2019, a downward trend that started in 2015.

A government spokesman says: “These statistics show a considerable decrease in repossessions compared to pre-pandemic levels, with a 64% decrease in landlord claims and a 59% decrease in mortgage claims compared to the same quarter in 2019.

“The action we’ve taken since the start of the pandemic helped keep renters in their homes – over 8 million households were protected by the pause in court possession proceedings.”

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Lockdown legacy: Belvoir reports on the impact of the pandemic on the rental market

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Belvoir asked property expert Kate Faulkner to review data from its rental index and quarterly branch surveys both during the pandemic and beyond.

Her subsequent ‘Belvoir pandemic report’ gives a unique insight into market trends during this traumatic period – and beyond.

“Belvoir’s data confirms that offices generally saw a dip in average rents during the pandemic, which has so far been reversed in 2021,” reveals Kate.

“But there is significant regional variation in rents – not just by area, but also whether the let was a flat, house or an HMO. This resulted in different experiences for landlords and tenants.

“During lockdown, rents for flats mostly stayed the same, or fell in value when compared to pre-lockdown. When the market re-opened in May 2020, this impacted on the second half of the year results, and most flat rents increased.

“In contrast, and similar to the sales market, house rents have been consistently increasing in most areas and continued to do so even during the first lockdown.

“Belvoir’s survey analysis shows that although the pandemic has had some impact, overall, this has been much less than would have been expected.

“In fact, the lettings’ market has been incredibly robust for those renting and letting through Belvoir. Unsurprisingly, many tenants stayed put during the pandemic, but coming out of lockdown during the second quarter of 2021, tenant trends appear to be returning to normal.

Rental arrears

“Belvoir offices reference tenants extraordinarily carefully, so rent arrears are few and far between. Pre lockdown, most offices had either zero or no more than three tenants who were more than one week in arrears. This figure jumped during the pandemic, but the trend had already started in Q1 2020 where most offices were dealing with 4-10 tenants in arrears.

“This trend continued through to Q1 2021, but in Q2 2021 we are seeing trends of less than three tenants in arrears, suggesting this was just a ‘blip’ throughout the pandemic.

“The data shows that from 2019 most offices rarely evicted anyone, and these trends changed little during the pandemic.

“There was an increase in Q4 of the percentage of offices reporting zero evictions, but now that evictions are able to proceed more easily, we are seeing a ‘catch up’ in Q2’s data.

“This shows that offices not evicting anyone has fallen from around 80% to just over 60%. But most offices are still only evicting two-three tenants, with a fraction evicting four or more.

Offloading properties

“Interestingly, Belvoir’s data shows an increase in the number of landlords selling properties from Q4 2020 versus pre-pandemic trends, but this is probably due to the lack of landlords selling in the first lockdown.

“During this period, 90% of offices saw fewer than three landlords selling up and the highest proportion of zero sales for nearly 40% of offices.

Comparing Q1 2019 to Q2 2021 when the country re-opened more, the proportions of landlords selling up seems to have returned to normal. Overall, it does not look like Belvoir landlords sold up due to the pandemic.

Pandemic purchasing

“Unsurprisingly, the number of landlords buying properties dipped during the first lockdown. As the market reopens, landlords have strongly returned to the market.

“During the first half of the year few Belvoir offices reported zero landlords buying, most saw 6-10 purchasing new stock, and in the latest quarter, for the first time in a while, a small proportion of offices saw 11+ landlords buying new tenant stock.

“Overall, from a lettings’ metrics basis, it appears that although there were some changes during the pandemic, in the main, long-term trends have returned to normal.

“The pandemic changed how Belvoir offices ran their businesses, with communication, problems doing inspections, and difficulties getting reputable contractors to carry out maintenance work cited as the main problems.

“But offices were quick to respond employing advanced technology with virtual viewings, and teams pulling together to provide as effective a service as possible.

“Despite the government’s efforts to encourage more people to buy, many tenants prefer to rent properties to achieve a much more flexible lifestyle.

“It is clear that the lettings market survived the impact of the pandemic incredibly well, which is good news for investors.”

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These figures dispel the myth peddled

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The number of repossession cases in the courts involving landlords using Section 21, ‘no explanation’ notices have plummeted over the past two years. A new analysis of government data shows that in the third quarter of this year, the number of cases brought to County Courts in England and Wales off the back of a Section 21 notice fell by 55% compared to the same quarter in 2019.

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