With tougher buy-to-let lending criteria set to be introduced in late September, landlords across the UK are being urged to remortgage before it becomes much trickier to secure finance.
The call from the National Landlords Association (NLA) comes at a time when the number of buy-to-let remortgage transactions, as a share of the overall lending market, has increased over the past few months. Demand for new buy-to-let loans has temporarily fallen, forcing many lenders to slash their mortgage rates – already favourable towards borrowers thanks to record low interest rates.
It is believed that the growth in remortgages is down to landlords seeking to limit their exposure to the new buy-to-let tax rules, which are due to come into play on September 30. The upcoming tightening of lending criteria is the latest in a series of attempts by the Bank of England’s Prudential Regulation Authority (PRA) to cool activity in the buy-to-let market, following other measures implemented earlier in 2017. In addition, the phasing out of mortgage interest tax relief started in earnest in April 2017.
As the Bank of England is the central bank for the whole of the UK, the forthcoming PRA changes will affect Scotland – and Scottish landlords – too.
Landlords are already finding it more difficult to obtain finance, the NLA’s most recent Quarterly Landlord Panel found. Some 43% of landlords are finding it harder to arrange mortgages, with finance more difficult to come by since the start of the year.
Landlords are also finding that they have to provide more to support mortgage applications. Over half (53%) said they have had to show additional evidence to back up recent mortgage applications, including things such as tax returns, cash flow forecasts and business plans.
With the second phase of the PRA’s underwriting standards set to be introduced in only a few short weeks, landlords considering a remortgage have been urged to act now.
The original PRA regulations were introduced in January and, as a result, the mortgage marketplace is looking increasingly complex.
The changes to buy-to-let taxation could start to affect the profits of many landlords and make it more challenging for them to effectively run and manage their businesses. As such, many are opting to remortgage to limit or offset their exposure to the upcoming changes – hence the increase in the number of buy-to-let remortgages taking place.
It’s not all doom and gloom, though – far from it. As we pointed out in a previous blog, achieving good rental yields and a good return on investment is highly feasible if you invest in the right sort of areas.
Currently, one of those areas is Scotland – and more specifically Edinburgh and the Lothians. Scottish rental yields continue to perform strongly, and favourably against England and Wales, which means that landlords and investors should be seriously considering investing in Scottish property.
Property investment doesn’t come without its issues, risks or downsides, but that’s where a good, reliable letting agent comes into their own, making the absolute most of your rental properties and ensuring that all parts of a tenancy are managed correctly and efficiently.
At Letting Solutions, West Lothian’s first dedicated lettings agency, we have the requisite experience and local knowledge to help you with all aspects of letting a property.
There’s a lot to think about, so we do most of the thinking on your behalf, taking the hassle and stress away and ensuring that tenancies pass by with a minimum of fuss. There’s never been a better time to invest in the private rented sector, with the number of people renting now higher than ever before, but inevitably there will be challenges along the way. With the right advice, support and systems in place, however, everything can go off without a hitch.
For more information about what we offer, please get in touch on 01506 425693.
What’s more, we provide free and instant online valuations to give you a good estimate of how much your property could be worth in the current marketplace.