BoE raises base rate – the property industry reacts

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The Bank of England’s decision to increase base interest rates from 4.25% to 4.5% today has led to the property industry reacting.

This is the twelfth consecutive interest rate rise – and the highest the rate has been in nearly 15 years.

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Seeking some initial advice

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Dear Property118

I am looking for some initial advice as I want to help my mother with her property held in a limited company. Since my father went into care she now manages the company which holds two rental flats.

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Interest rate rise set to hit mortgage payments and rental market

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The Bank of England has hiked interest rates by 0.25 percentage points, pushing the base rate to 4.5% and raising fears that this could exacerbate rental prices and increase repossessions.

Interest rates were already at a 15-year high before the twelfth consecutive rise since December 2021, which will see millions of property owners facing higher mortgage repayments. Those with an average 2.58% fixed rate (available in 2021) set to expire this year will see their mortgage payments increase by £13,000 a year if they have a £250,000 loan, according to investment firm AJ Bell.

Negative equity

Group chairman of Cornerstone Tax, David Hannah, believes it was a mistake to raise rates again, as it could tip the economy into recession. “We’ve just witnessed the introduction of the 100% mortgage for renters, which means they’ve got no equity,” he explains. “Now we’re raising interest rates, putting pressure on affordability, which increases the risk of a property price decline – also meaning that those 100% mortgages are going to be in negative equity.”

Homeowners coming off fixed rate deals and moving straight into a 5.5% mortgage are going to be unable to afford them which will lead to many more repossessions and forced sales, he adds.

Housing ladder

The interest rate rise is also set to affect first-time buyers who may now be unable to get onto the housing ladder due to unaffordable mortgage rates, says Hannah, who believes the rise will also have a knock-on effect on the rental market. “It has already been suffering from a lack of supply, and now, with a growing number of would-be buyers in need of a place to live, this is going to be exacerbated further. The result of this is that rental prices and competition will likely increase at a time when people are already struggling.”

View Full Article: Interest rate rise set to hit mortgage payments and rental market

Plea to support landlords with rental reforms as record numbers plan exodus

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The Renters Reform Bill will increase pressure on landlords and may force even more to quit the market, warns the Royal Institution of Chartered Surveyors (RICS).

Its alarm comes as the number of landlords planning to sell rented properties has already reached its highest rate on record, according to new data from the NRLA. It found that in Q1, 33% of private landlords in England and Wales planned to downsize, up from 20% the same time last year. Meanwhile, only 10% of landlords plan to increase the number of properties they rent out as 67% said demand for properties from prospective tenants was increasing.

Higher rents

The RICS predicts that with demand continuing to outstrip supply, rental prices will be driven higher over the next few months. Samuel Rees, senior public affairs officer, explains that it’s increasingly concerned about the pressures facing the rental market. “Demand for rental homes remains high, but stock remains low, and landlords are increasingly exiting the market – which is translating into higher rents.”

Adds Rees: “The government’s proposed changes…will increase pressure on landlords and may force even more to exit the market. The government needs to ensure that proposed reforms to the rental market are delivered in such a way that it increases support for landlords and tenants and maintains and grows supply.”

Instructions dropped

Its poll reveals that tenant demand increased in the three months to April according to a net balance of +41%, while landlord instructions dropped, with a net balance of –24% of respondents reporting a decline.

Buy-to-let landlords offloading property are behind rocketing receipts of Capital Gains Tax, according to new figures from HMRC which show it collected £18.1 billion in CGT in 2022/23, £7 billion more than two years previously. The growth is set to continue as the CGT annual tax-free exemption has been cut from £12,300 a year to £6,000 and will fall to £3,000 from April next year, according to NFU Mutual.

View Full Article: Plea to support landlords with rental reforms as record numbers plan exodus

Record number of landlords are selling up – NRLA

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Despite record tenant demand for a rented home, the number of landlords quitting has rocketed to a new high, research shows.

Polling by the National Residential Landlords’ Association found that the number of landlords who are planning to sell their properties has hit its highest rate on record.

View Full Article: Record number of landlords are selling up – NRLA

Gove shelves plans to scrap leaseholds after Number 10 row

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Housing Secretary Michael Gove has dropped plans to abolish leaseholds in England and Wales after Downing Street officials argued there was not enough time to enact such major reforms.

Despite describing it as “an outdated feudal system” and pledging to get rid of leaseholds earlier this year, he will stop short of doing so, according to The Guardian. Gove had wanted to replace leaseholds for flats with a commonhold system, which would allow owners to make joint decisions about what should happen in shared areas of the building.

Crippling bills

In the aftermath of Grenfell, many homeowners have faced crippling bills and cannot sell their properties after buying leasehold flats that the freeholders refuse to make safe. New figures from the DLUHC show that in 2021-22, there were an estimated 4.98 million leasehold dwellings in England, with 38% of homes in the PRS owned on a leasehold basis.

Speaking on Sky News in January, Gove explained: “The fundamental thing is that leasehold is just an unfair form of property ownership. In crude terms if you buy a flat, that should be yours.”

Ground rents

However, he is still set to announce a range of measures to protect leaseholders next month, including a cap on ground rents, more powers for tenants to choose their own property management companies and a ban on building owners forcing leaseholders to pay any legal costs incurred as part of a dispute.

A spokesperson for the Department for Levelling Up, Housing and Communities told the paper: “We are determined to better protect and empower leaseholders to challenge unreasonable costs. In line with our manifesto commitment, we will bring forward further leasehold reforms later in this parliament.”

Property lawyer at JMW, David Smith, says Gove’s decision was predictable. “With the ongoing (and not exactly well met) challenges of PRS reform, standards in social housing, and the Building Safety Act, it was unrealistic to take on a fourth major reform programme.”

View Full Article: Gove shelves plans to scrap leaseholds after Number 10 row

How many landlords are impacted by the building safety crisis?

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Hello, my name is Suzy Spilling, co-founder of the NON-Qualifying Leaseholder campaign group.

I didn’t know if any Property118 members are impacted by the Building Safety Act and Leaseholder Protections or are aware of the following NRLA survey.

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Property 118 – Feedback testimonials

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Hello to all Property 118 readers,

My name is Elizabeth Warburton and I am head of video content here at Property 118.
I understand that Property 118 has brought an extremely informative, educational and completely free platform to help us Landlords now for many many years

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Manchester’s selective landlord licensing scheme expands

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Manchester City Council has announced that its selective landlord licensing scheme has expanded this week to cover 700 more rented homes.

There are five new licensing schemes in four neighbourhoods and landlords will now need to be licensed.

View Full Article: Manchester’s selective landlord licensing scheme expands