News
Happy New Year * Financial New Year
By AMBER PRITCHARD
As of this month, buy-to-let( BTL) stamp duty has risen 3 % on BTL and buyers additional properties. The slab tax will apply to the price of the entire purchase creating some eye watering figures for those looking to invest. The chancellor’ s decision to introduce the tax is the latest in a series of short-sighted policies aimed at the property market, which include cutting back on tax relief for repairs and mortgage interest costs. All in a bid to raise revenue to help fund his programmes which support first-time buyers and increase home ownership, such as the‘ Help To Buy’ scheme. The only viable way forward to create a competitive market between lenders in the current market is to keep their affordability rules applying to borrowers low. Keeping these rates down, between 4.9 % and 6 %, so lenders are not about to tighten their affordability rules despite the increase in tax. Back in November of last year when Chancellor George Osbourne announced the rise in the stamp duty tax, buyers were notified of the option to complete payments rather than exchange before the month of March was up, to ensure they would not face the extra costs. At this point the idea was that lenders would inflate their numbers within the lending criteria, Barclays were the first to take this step late last year imagining other lenders would eventually follow suit *. As one of the country’ s biggest buy-to-let lenders the bank increased its“ rental cover ratio” from industry standard 125 % to 135 %, meaning applicants must be able to cover at least 135 % of their mortgage repayments. The interest rates on these mortgage repayments, aka‘ stress rates’ are typically much higher that the loan itself, testing the ability of the borrower’ s ability to cope with prospective rising rates. However, none of the other major lenders in the field have any plans to raise the rental cover ratios, if anything they are loosening their rules to attract more borrowers. Interest rates are being lowered as the only possible way to compete, since the market has seen a significant decrease in buy-to let-mortgage sales. During March a month-to-month drop of 26.2 % was recorded, the equivalent of over more than a £ 1 billion fall according to financial data provider, Equifax Touchstone. Iain Hill, relationship manager, Equifax Touchstone, said:“ Recent buy-to-let mortgage flows indicate that borrowers took the advice of their lenders, and initiated transactions in good time to avoid an eleventh-hour panic.“ The big question from here is, to what extent will the new stamp duty rates discourage investors from entering into new deals? With so much economic uncertainty, property remains an attractive investment option for many people. Given the rollercoaster first quarter of 2016, it will be interesting to see where sales trends go from here.” With interest rates at an all-time low, the Bank of England’ s financial regulatory body, Prudential Regulation Authority( PRA) are worrying the rates could cause a risky lending boom resulting in a credit bubble. The standard rental cover ratio of 125 % is not to be changed by such lenders including, HSBC, Lloyds, Halifax, Virgin Money, Nationwide or RBS. Although TSB have recently said they will be amending their affordability rules, but not any time soon. Aldermore, the commercial lending provider, is the only lender ahead of Barclays to increase their affordability criteria to 150 %. With a reputation of prudent attributes the firm’ s strategy aims to safeguard their customers from future financial changes. Stamp duty on buy-to-let properties will inevitability make renting more expensive and in turn result in the inability of people being able to save towards a deposit. Therefore, landlords are in turn taking time to fight the cuts to mortgage interest relief which is set to be phased in by this time next year. Although George Osbourne has said the raised rate of relief would be gradually withdrawn over four years, starting the year 2017, buy-to-let investors aim to raise a further £ 250, 000 to add to their already fund of £ 50, 000 to launch a judicial review against the incoming restrictions. The challenge is being led by Cherie Blair to promote landlords and tenants working in union to end the so called‘ victimisation’.
* Keep your suit slick, for the women heading the financial world check out p8.
Best rates this month:
2 Year Fixed Yorkshire Building Society Rate: 1.64 % reverting to 4.99 % APRC: 4.5 % Period: 31 / 07 / 2018 Max LTV: 85 %
Help to Buy
Post Office Money Rate: 3.68 % reverting to 4.49 % APRC: 4.5 % Period: 31 / 05 / 2018 Max LTV: 95 %
Remortgage
The co-operative Bank Rate: 1.69 % reverting to 4.74 % APRC: 4.3 % Period: 31 / 07 / 2018 Max LTV: 80 %
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