For the first six months of the year, see the first part of Ying Tan’s review.
After forming a majority government two months earlier, the Conservative Party was ready to deliver its emergency Budget in July. When Chancellor George Osborne stood to address the House of Commons, landlords had no idea what was to come. In a shock move the Chancellor announced plans to cut landlord tax relief to the basic rate of 20%.
The market was stunned. Such a move could seriously damage landlords’ livelihoods prompting many to leave the sector.
However, it wasn’t long before the innovative spirit of the market came through as investors began to explore ways to manage the cuts, including creating limited companies – something which I’m sure we will see a lot of in 2016.
Precise Mortgages was the lender making the trade news in August as it launched a range of second charge buy-to-let products with rates starting at 5.95%.
The products, aimed at prime landlords wishing to raise capital from the equity in their portfolios, were made available on an interest-only and capital repayment basis.
Come next March, when Mortgage Credit Directive rules come into play, the second charge mortgage sector will be regulated in exactly the same way as the first and we’re likely to see more brokers embracing the opportunities secured lending provides.
In the unregulated buy-to-let world, more second charge loans are something landlords have been calling for for some time so Precise’s move was certainly very welcome.
September saw Precise Mortgages grab the headlines yet again, this time by announcing a series of changes to its new-build criteria. The lender has always offered products for new builds but by enhancing its criteria it showed its commitment to the sector.
Until now, new builds have been something lenders have tended to shy away from – with most deeming them too risky a bet to take. However, with many young professionals choosing to rent for longer, the appeal for new builds, which are more often than not in great, central locations and offer fantastic amenities, grew. Investors saw the rental potential they offered and Precise led the way in catering for such investors. I’m sure we’ll see this sector continue to grow next year.
Other criteria changes during September included BM Solutions announcing it would no longer accept foreign currency income for new mortgage lending. This applies to all new customers applying for a buy-to-let or let-to-buy mortgage or remortgage. BM says the change does not apply to existing customers.
By October one thing was clear in the buy-to-let market – competition was rife. Indeed, for the first time since before the credit crunch hit, demand for business from lenders was much higher than brokers could supply. The buy-to-let market has obviously had a tough time over the last few years so to find ourselves in a position where lenders were beating down our doors looking for more business was a strange place to be!
Meanwhile, one of the new lenders responsible for that increased competition, Foundation Home Loans, made some enhancements to its product range including allowing borrowers to purchase a personally owned buy to let into a limited structure using a director’s loan. This was a very interesting move giving the issues surround landlord tax relief at present.
Politics were the dominant force in November once again as Chancellor George Osborne continued on his mission to change the buy-to-let market as we know it. In his Autumn Statement and Spending Review the Chancellor revealed anyone buying a second property – including, of course, buy-to-let landlords – would have to pay an additional 3% on each band of Stamp Duty.
The full details of the proposal have not yet been announced although it is looking likely that limited companies with 15 or more properties would not be subject to the increased charge. It seems clear that the Chancellor is trying to push the market into the direction of big business. Is this the end for the individual investor?
And here we find ourselves at the start of another festive season. The market wind down will soon begin as office Christmas parties and planning ahead for 2016 take precedence.
It’s been an interesting year for buy to let and I’m proud to say brokers and lenders have risen to the challenges put in front of us. Let’s hope 2016 is just as exciting and innovative but perhaps with less government intervention!