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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