At the Property Investor and Homebuyers show at the London ExCel last weekend, it was a great opportunity to talk to professional landlords, as well as those looking to take their first steps onto the Buy to Let sector ladder.
With many changes and increases in taxation on profits being recently introduced along with licence requirements for houses of multiple occupation, minimum size requirements on rooms, and minimum standards for energy efficiency, etc, the Buy to Let sector has taken quite a beating!
One of the main specialist lenders in this area, Kent Reliance, recently issued their Buy to Let Britain Report, edition nine, which looks at Buy to Let trends and the sectors confidence.
The report suggests that Brexit uncertainty and Government intervention has subdued the growth of the Private Rental Sector. However, rents are rising at their fastest annual rate since 2017, climbing by 1.3% to £896 pcm.
Despite landlord confidence falling to it’s second-lowest level, rents are outpacing house prices with average yields rising to a two-year high (4.5%). Yields in London are at their highest since 2015!
The report continues stating that remortgaging activity accounts for three quarters of mortgage lending in Buy to Let as landlords look to lower costs and fix mortgage rates. Whilst 72% of all Buy to Let mortgage applications for purchasing a property are now made in a limited company name.
Since the Prudential Regulation Authority stress test rules came into effect in 2017, lenders have to work out affordability on a Buy to Let mortgage based on the rental income achievable from the property and stress the product term over a five year period, often at 145% of a nominal rate of 5.5%. Lenders interpret the rules differently and differentiate between a Buy to Let in a personal name compared to a property brought in a limited company name.
So, if this is an area you are looking at moving in to, seek advice (and especially tax advice) as buying in a limited company name and over a five-year fixed rate, could allow you to achieve a mortgage loan substantially higher than against in your personal name and a based on two year mortgage deal. Terms always apply and read the small print!