Thinking Differently

Landlords, as ever, are a pretty resilient group, and that’s why the Private Rented Sector remains a sizeable marketplace encompassing around 5m properties.
(Source: English Housing Survey, 2021, and then pro-rata calculation for all UK)

Whilst the pandemic has created issues for Landlords, the main fundamentals are still in place:
Demand remains. For renters who want to become homeowners, there’s a lack of suitable housing stock, and problems with building up a deposit These issues mean that many may stay as renters, and that helps to deliver the current decent rental incomes.

House prices continue to rise. Landlord’s, with an existing portfolio, are likely to have benefited. This opens up better opportunities to access funds to secure new properties, or to renovate current ones. This may be timely in light of the future Energy Performance Certificate changes, requiring a rating of C, or above (phased in from 2025).

Range of mortgage deals on offer. Like the residential market, rates are on an upward trajectory, but they’re still coming from a very low base. Also, to reflect lender confidence in this sector, there has been a return in recent times of some 15-20% deposit deals – rather than the norm of needing at least a 25% deposit.
(Source: Moneyfacts, January 2022)

Remortgaging this year

A sizeable number of landlords (on 5-year deals) will also be actively looking to remortgage this year, quite apart from those that simply want to take advantage of the rates on offer.

This is because over twice as many landlords took out 5-year deals in 2017 than 2016, as a consequence of the new regulatory issues at the time. Those rules required less stress-testing on 5-year deals against those with a shorter deal term – hence the shift.
So, if you’re part of this group, your circumstances are likely to have altered over the last five years. Also, the marketplace will have changed (such as the move out of the big cities in recent times), plus lender options would have moved on. As ever, we’re there to help you through this process.

Limited Company status

A reflection of the adaptability of landlords is the sizeable growth in those opting for Limited Company status, with about 270,000 companies now in play, which covers around 29% of all buy-to-let mortgages.
(Source: Hamptons report, January 2022)

The higher rate taxpayers have been particularly motivated by it, as the regulatory rules that kicked in from 2017 limited the mortgage finance that you could offset against your individual income. The Limited Company route may help mitigate those tax changes.

However, it won’t be the most suitable option for all, so do speak to your accountant and solicitor regarding tax issues, and property structures (such as any leasehold issues you may face). And we’re there to give an overview, and to assist with sourcing suitable deals.

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that the rental income will be sufficient to meet the costs of the mortgage.
The value of your Buy-to-Let property and income from it can go down as well as up. You may also require advice on the legal and tax issues.
The Financial Conduct Authority does not regulate legal and taxation advice, and most Buy-to-Let mortgages.
HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

You may have to pay an early repayment charge to your existing lender if you remortgage.

Your property may be repossessed if you do not keep up repayments on your mortgage.

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