Financial services expert’s inside track on in the current UK market
Last week I mixed with fellow mortgage alumni and Lenders at the Financial Services Expo and exchanged ideas and thoughts on the future of the UK buy to let mortgage market which will also have a huge impact on the overall UK property market. It was also good hear from many experts on their opinion on property remaining the best asset class to invest in despite Brexit and the looming buy-to-let taxation changes.
Buy to let mortgage sector – tightening of rental calculations
The good news is rental calculations will continue to be the cornerstone of underwriting with background affordability a passive secondary consideration (accept for accidental landlords caught under the jurisdiction of ‘consumer’ buy to lets). However, the buffer rental coverage is likely to continue to rise to account for the adjustment in taxation planned for April 2017 and also to slow down over-gearing.
Buy to let mortgage sector – move to company structures
The debate as to whether to hold properties in personal names, limited liability partnerships (LLPs) or limited company structures (onshore and offshore) continues to rage; as does the discussion on the transition between the various models. What is apparent is serious professional landlords need expert advice from tax specialists from mortgage brokers, and strong relationships may squeeze out the casual players (at Niche we can affect an introduction to a specialist tax adviser if required). My own view is for casual landlords there are still a few simple ways to protect yourselves for example looking to add family members on the property before you look to go down the more complicated paths but again speaking to an accounts professional is going to be the best place to start.
The Wider UK Property Market
The onset of increased buy to let taxation could see Landlords ditching some of their stock to avoid reaching higher rate tax brackets. In particular those whose main occupations are different from a full time Landlord. Coupled with the effect of Brexit on property values it should free up more attainable properties for first time buyers, at least this is the theory. Conversely, with interest expected to remain at record lows, which is backed by the number of long term fixed rates that have flooded the market, property investment remains a viable investment to make a good return. It could be however that buy to lets become more concentrated in certain pockets of the county. Certainly we have seen increased activity in Buy to let business in the Midlands as landlord’s search for better rental returns. In conclusion UK property is still going to remain a strong market as the fundamentals of supply and demand are still very much present.
Non-standard specialist residential mortgages
Credit continues to ease, and whilst not back to the heady days pre-crunch, more and more Lenders are entering the fray and availability and pricing of credit impaired market is improving daily. For example solutions for county court judgements and defaults of any size can be considered if registered 6 months ago as can mortgage arrears after 12 months ago. This is a major change; but solutions for IVAs and bankruptcy continue to be sparse.
Lending into retirement
Lenders were seemingly running scared of any borrowing beyond normal retirement age as they appeared to misread the incoming FCA intentions back in April 2014, however matters have settled and arguably reversed. In 2016 has seen this trend continue with widespread recognition that buy to let mortgages are a method of funding into retirement rather than a liability draining resources as such the Lenders have been pushing the age limits out further and further.
On the residential side the biggest challenge for many applicants is showing good affordability during retirement. This could be by the means of pension and investment income which is still challenging however we have been working with a Lifetime Mortgage Broker firm who do have some innovative solutions for applicants over the age of 67 buy offering Lifetime Mortgage solutions that do not require income proof as they are based on a share of the property being taken as collateral. Do let us know if your interested in this type of a deal and we can refer your details to them.
For more information and guidance on all types of mortgages please call us on T: (020) 7993 2044 or complete our online enquiry form.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.