REVEALED: Why higher interest rates are making it trickier for BTL investors

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Buy-to-let mortgage searches were down 23% in April compared to the previous month, while investors have been putting down larger deposits as high-interest rates bite.

Research by Twenty7tec shows that average loan-to-value (LTV) has dropped considerably over the past year, from 66% in April 2022 to 61%.

London average BTL property prices have fallen by 4%, while loans required dropped 15% as landlords put larger deposits down. National average BTL property prices increased 0.6%, while loans required dropped 8%.

Those looking to buy had, on average, higher combined incomes of £68,907 (up 4% nationally compared to March) and £88,276 in London (up 3%).

Lee Grandin (pictured), MD of Landlord Mortgages, says the significant increase in interest rates has impacted landlords’ ability to finance.

“Assuming rental income remains static, then as interest rates rise the landlord is forced to borrow less,” he tells LandlordZONE. “This means fewer mortgages can be granted at the funding level landlords want and if property values remain static this drives down the loan to values.”

Dropped

Mortgage product volumes have dropped by about 50% in the max LTV 65% range, explains Nathan Reilly, director at Twenty7tec, who says the real driver for increased use of max LTV 60% products is that landlords are trying to rebalance their portfolios to reduce their costs.

“The drop from 65% to 60% is a breakpoint which yields real benefit to landlords looking to offset the increasing interest rate environment.”

Reilly says there has been a 10% bump in 65% product availability during the past month, but where possible, he expects landlords to continue to use the lower max LTV products until they see interest rates go down.

“Why have searches gone down? It’s hard to say for sure, but interest rate uncertainty must be one overarching factor,” he tells LandlordZONE.

View Full Article: REVEALED: Why higher interest rates are making it trickier for BTL investors

New report urges Government to stop describing private landlords as ‘bad’

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Government policy should move away from thinking that social housing and home ownership are good while private landlords are bad’ if it is to solve the rental stock and rent costs crisis.

That’s the view of a new report from Cambridge University Land Society which says this mindset translates into discrepancies when helping the PRS to retrofit properties, as it largely doesn’t have access to public funding or political support.

“Homes rented privately are no less valuable or important than owner occupied or social homes, but they are typically less well capitalised even before the need to retrofit and yet only sticks are used to incentivise action – no carrots – because this tenure is positioned as worse,” according to the authors of A Vision for the UK Housing Market.

They have tried to come up with genuine solutions to the housing crisis and suggest that policy should instead incentivise quality upgrades for existing properties.

Landlord incentives

The report suggests mortgage lenders should be encouraged to offer discounted mortgage products to property owners providing longer term tenancies, and that property owners offering longer leases could be given tax breaks to provide residents with greater security.

It also suggests releasing the freeze on Local Housing Allowance and enhancing incentives to mortgage lenders to offer long term low interest rate mortgages in return for energy performance upgrades.

The report adds that it would help if the government moved away from old fashioned terms such as landlord and tenant and used property owner and resident in its policies instead.

The authors explain: “The overriding proposal is for more joined up and coherent housing policy. This should run wider than just not changing housing ministers frequently but also engage HM Treasury and the financial regulators. Only then could we achieve the goal of defining and moving towards housing market success.”

Read the report in full.

View Full Article: New report urges Government to stop describing private landlords as ‘bad’

87 MPs are now landlords including Chancellor, reveals campaign group

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Nearly one in five Conservative MPs are currently landlords, according to research by campaign group 38 Degrees, a surprising figure given the Government’s anti-landlord stance in recent years.

The study counted 87 MP landlords – more than 13% of the Commons – of whom 53 claimed rental income from one home and 34 from two or more properties, according to a report in The Guardian.

Of the 68 Conservative MPs, chancellor Jeremy Hunt has seven flats in Southampton, while home secretary Suella Braverman, Gillian Keegan, the education secretary, and Lucy Frazer, the culture secretary, all declared one rental property in the latest House of Commons members’ register of financial interests.

Income

Alex Chalk, the justice secretary, declared a flat in Shepherd’s Bush and a share in a cottage in Gloucestershire, both producing more than £10,000 a year in income.

On the Labour frontbench, David Lammy, Emily Thornberry and Lucy Powell are all landlords. Overall, MPs could be earning as much as £2.2m a year from renting out homes, the research found.

38 Degrees chief executive Matthew McGregor (pictured) says: “Whilst we make no inherent criticism of those politicians who make money from renting property, we highlight their extra duty, to their tenants as well as their constituents, to bring forward reform without delay.

“With MPs almost four times more likely to be landlords than the rest of the population, and with eight cabinet members and nearly one in five Conservative MPs earning rental income, we highlight the need for tenants’ voices to be heard at the top of government.”

Housing Secretary Michael Gove has announced that the draft Renters Reform Bill will be published next week and would “change the way the relationship between landlords and tenants works, providing tenants with new protection, which should ensure they are better protected against arbitrary rent increases”.

View Full Article: 87 MPs are now landlords including Chancellor, reveals campaign group

The Property Cast: How can landlords spot a bad letting agent?

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In this episode of The Property Cast, founder of the HFIS group, Eddie Hooker, is joined by the Head of Redress at the Property Redress Scheme, Sean Hooker, and special guest Nathan Emerson – CEO of Propertymark – the leading membership body for property agents.

With the private rented sector on the cusp of a major overhaul, this episode explores Propertymark’s perspective on all things lettings.

Eddie, Sean and Nathan kick off by discussing what makes a bad agent. There are two types, says Nathan – but how can landlords spot one? And what are the most common agent errors? Nathan provides his top tips for landlords when it comes to choosing a letting agent.

Changes

How does Propertymark view the big changes that are coming for the rental sector? And what aspects of reform are likely to have the biggest impact on landlords and agents?

The trio discuss topical issues from antisocial behaviour and pets, to whether landlord redress is the right way to raise standards in the private rented sector. We hear a lot about landlords exiting the market, but how can landlords be encouraged to invest? What would Nathan do if he could change one thing to keep landlords in the sector?

On the way to Wembley

Finally, the Propertymark One conference is coming up on 27 June at the OVO Arena in Wembley. Open to both members and non-members, and bringing several disciplines together under one roof, it will be the biggest event Propertymark has ever staged.

What can delegates expect? Tune in to find out more and to hear Nathan’s answer to The Property Cast’s closing question – ‘You’ve got £20k to invest in improvements to your rental property – what changes would you choose to make, and why?

View Full Article: The Property Cast: How can landlords spot a bad letting agent?

Build-to-rent sector stalls as completions slump

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The number of build-to-rent (BTR) completions in the UK has slumped by 56% in a year – with the decline being blamed on the London market, research reveals.

Property developer Stripe Property Group has analysed the historic data on the annual BTR completions in London and elsewhere to better understand the emerging residential sector.

View Full Article: Build-to-rent sector stalls as completions slump

Controversial Renters Reform Bill to be published next week – possibly

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The long-awaited Renters’ Reform Bill which could lead to a massive shake-up of the private rented sector (PRS) is set to be published next week.

However, there is no confirmed date and no mention of it in the Parliamentary timetable for next week.

View Full Article: Controversial Renters Reform Bill to be published next week – possibly

Airbnb returns to its roots with ‘Rooms’ but will initiative silence critics?

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Airbnb is going back to its roots by launching Airbnb Rooms, an updated version of its original aim to let guests stay in a room within someone else’s home.

The platform explains that in the current cost-of-living crisis, and years of being isolated, visitors are looking for “ways to connect with people and have authentic experiences”.

Founders Joe Gebbia and Brian Chesky (main pic) came up the idea of allowing people to rent out a spare room for the odd night or two after they charged three guests $80 each to sleep on airbeds in their San Francisco apartment in 2007. The concept has since grown to more than four million hosts across the world.

This year, Airbnb is expecting more than 300 million guest arrivals but it, along with the rest of the short-lets sector, has come under increasing scrutiny from communities, councillors and MPs – particularly in coastal resorts – who claim it is depriving residents of long-term rented accommodation. This move would seem to go some way to addressing that.

Host passport

The platform explains that every Airbnb Room will feature a Host Passport, which helps guests get to know their host before booking their stay, including a larger personal photo and background information.

It has created a rooms category with more than one million listings, showing whether the bathrooms are shared or private, if the bedroom door has a lock and whether people other than the host will be there during a stay.

“With Airbnb Rooms, we’re getting back to the idea that started it all – back to our founding ethos of sharing,” says Chesky.

“Airbnb Rooms are often more affordable than hotels, and they’re the most authentic way to experience a city.”

View Full Article: Airbnb returns to its roots with ‘Rooms’ but will initiative silence critics?

LATEST: Renters’ Reform Bill due next week after Coronation, says Gove

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The Renters’ Reform Bill is finally due to be published next week – four years after it was first discussed.

As predicted, the draft legislation will begin life a few days after the King’s coronation, Housing Secretary Michael Gove confirmed on Sky News this morning.

Gove said: “We’re introducing new legislation, it will be out next week and it will change the way in which the relationship between landlords and tenants work, providing tenants with new protection which should ensure that they’re better protected from arbitrary rent increases.”

Many in the sector are now bracing themselves in readiness for what the Bill could contain, and which is expected to a different name.

Crash helmets

Tenancy expert at PRS Mediation, Julie Ford, posted: “Crash helmets on people! We’ve got a good idea of what’s going to be in there, we’ve seen the consultation and Bill in its original form and seen the white paper but what it’s actually going to look like, who knows?

“We know Section 21 will be abolished and we need to get ready for that, but what else is going to be in there? We’ll have to wait and see.”

Fun week

NRLA chief executive Ben Beadle commented: “Secretary of State Michael Gove confirms that we will see the long awaited #rentersreform bill next week. A fun week ahead beckons!”

The government first announced its proposals in on ‘a new deal for renting: resetting the balance of rights and responsibilities between landlords and tenants’ back in 2019, followed by a White Paper last year.

After a protracted consultation, suggested measures are set to include abolishing Section 21, a property portal, requiring private rented properties to meet the Decent Homes Standard and establishing a new ombudsman covering private landlords.

Last month Michael Gove held a roundtable meeting with key representatives from the private rental sector to discuss the reforms, including the NRLA, Generation Rent, Shelter, the Local Government Association, and National Housing Federation.

View Full Article: LATEST: Renters’ Reform Bill due next week after Coronation, says Gove

BLOG: Can ‘guaranteed rent’ attract more landlords and fix the social housing crisis?

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As the largest accredited supplier of properties to local authorities in London and Essex, Leigh Young (pictured), Co-founder of the Elliot Leigh Guaranteed Rent Scheme, talks about how a shift in mindset could help some landlords navigate the current and future market challenges.

We have, like most other organisations in the buy-to-let sector, seen a significant shift in landlord sentiment over the last few years, with one of the biggest driving forces being fear.  

Fears over how the changes already brought in will financially impact them, such as the Tenant Fees Act and cuts to mortgage interest relief, and worries about the impending changes such as scrapping of Section 21 and implementation of minimum EPC requirements.

When we started Elliot Leigh 20 years ago, it was with the view of alleviating fear for landlords. As landlords ourselves, we could see the impact of void periods, refurbishment cost and rent arrears.

Elliot [Altman] had a property in Tower Hamlets, but since it was let to students, he would only receive income for 10 months of the year, then have a two-month void period, as well as the repair costs. W

hen he offered it vacant to a local authority, he was suddenly able to guarantee his income for 52 weeks of the year and eradicate the ‘fear’. This was the start of Elliot Leigh.

Fixed rent

Our scheme was set up to guarantee landlords a fixed amount of rent each month, regardless of whether their property is occupied or not, reducing the financial risk by offering assurance of a regular income stream, and avoiding the possibility of rent arrears.

The properties, being let to local authorities but fully managed by us, attracted landlords who wanted to avoid the hassle of finding and managing tenants, as well as the risk of rental arrears or void periods.

Today, the complexities around being a landlord present a host of new, and frankly justified, fears, which go beyond voids and rent arrears.

That includes compliance, finding reliable tenants, access, legislation, eviction, financial balancing…the list goes on.

We’ve seen some landlords deciding the industry is no longer for them, but we’ve also spoken to landlords who want to evolve in order to remain as landlords. However, they can see that incoming legislation, in particular the abolition of Section 21, may reduce their security and choice.

Eradicated

But despite the impending changes, the buy-to-let market will not be eradicated. There are millions of people who rely on it for housing – in the social sector alone there are over 1.2 million households waiting for a property and nearly 100,000 households living in temporary accommodation.

Even with ambitious building plans, we are years away from being able to significantly reduce that number. Ultimately, each landlord’s circumstances, why they became a landlord, their risk tolerance, their financial position today and aspirations going forward are individual, but in my view, despite the challenges, there is still opportunity.

Desperate need

Local authorities are in desperate need of more properties from private landlords in order to address the shortage of housing in their areas.

They are responsible for ensuring that there is an adequate supply of affordable housing for their residents, and right now most are failing, causing a chronic housing crisis.  One of the key ways they can change this is by working with private landlords to provide suitable properties.

Many landlords are considering existing the market over fears that new legislation will make it harder for them to evict tenants, leaving them trapped.  

We know that some private landlords are reluctant to work with local authorities because they’re worried about regulation, bureaucracy, or the perceived risk of renting to tenants who may have difficulty paying rent or may cause damage to their property, but local authorities are keen to alleviate landlords’ concerns and attract them back to the social sector.  

Mitigate risks

Guaranteed rent as a way to mitigate the potential risks associated with the abolition of Section 21 could be one aspect which draws landlords back in.

It will require cooperation and collaboration between various stakeholders, including local authorities, private landlords, housing associations, and tenants.

But by working together, it’s possible to address the shortage of affordable housing, offer a greater pool of safe, secure housing, as well as provide landlords with a solution which enables them to be hands-off with a stable income stream, without concerns over incoming legislation.

View Full Article: BLOG: Can ‘guaranteed rent’ attract more landlords and fix the social housing crisis?

An open letter to Sadiq Khan and his plans for a rent freeze

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Calls by London Mayor Sadiq Khan for a rent freeze in the capital have led one resident to pen an open letter in the hope of a response.

Rob Thomas is a mortgage market researcher, and he was prompted to write to the mayor after reading on Property118 that Mr Khan had signed a letter urging a rent freeze ‘because landlords can afford it’

View Full Article: An open letter to Sadiq Khan and his plans for a rent freeze