If property prices fall due to Brexit?
Property investors have taken a further hit with several lenders making it more difficult to obtain finance for buy-to-let. This comes after a series of bad news including Stamp Duty rises and tax relief cuts on mortgage interest. However, if property prices fall faster than rent, could this work in favour for landlords and buy-to-let mortgages.
This does not constitute advice and advice should be sought in all instances before acting on it.
Your property may be at risk should you be unable to maintain any agreed mortgage payments over the term agreed.
Tighter lending policy for buy-to-let
TSB are the latest lender to tighten their lending policy for buy-to-let mortgages. This follows Nationwide and Barclays earlier this year. These lenders have decreased the amount they will lend to a landlord in comparison to their anticipated rental income.
Lenders are taking measures in line with a Bank of England (BoE) consultation, the outcome of which will be announced later this summer. The consultation could result in tighter regulations for lenders regarding buy-to-let mortgage applications, forcing them to also take into account the wider costs of a landlord, even including tax.
Landlords are losing money
All-in-all landlords are having to, or will need to, either increase their rental price to cover additional costs, or take less profit. Some may also struggle to obtain finance for new buy-to-lets or, they could get stuck on a buy-to-let mortgage with a high interest rate, as they won’t meet new lending criteria to remortgage.
This is similar to what is also happening with some residential mortgages, only the government “have it in” for property investment at the moment, so everything is an uphill climb.
Experts calculate that for a landlord paying tax at higher-rate, they will need to cover their rental income by over 150 percent, with the new changes to mortgage interest alone. This could be even more if mortgage lending policy changes too.
“Mathematically speaking, it makes sense for higher-rate taxpaying landlords to need rental cover at 156pc, and additional-rate taxpaying landlords at 167pc.” Mortgages for Business
How Brexit could help landlords with short-term goals
The market is predicting that house prices will take a tumble after Brexit, with the country preparing for another recession.
If house prices do ease-off and, if rental yields remain the same, this could offer some temporary relief for property investors in terms of obtaining buy-to-let finance.
It isn’t such good news for the existing property portfolio, however, given time, this will hopefully bounce back.
What it may do though is bring a reduction in the mortgage payment, compared to the rental income, allowing the new mortgage application hurdles to be jumped.
As there is much uncertainty and change at the moment, it is important to seek advice from professionals that can help you make the right decisions and get the timing right.
Need a buy-to-let mortgage. Speak to Chris
If you need to discuss a new or existing buy-to-let mortgage, speak to Chris, our specialist mortgage broker. He can discuss the best rates and a plan of action.
Tel: 01403 780 770