The next stage of removing mortgage interest relief has been introduced. From 6 April, landlords can only claim a quarter of their mortgage interest as a business expense. Next year this relief will be removed completely.
This is one of many changes taking place in the renting sector. The long-awaited Tenant Fees Act, which will massively reduce the fees that renters can be charged on all new contracts from 1 June, has also come into effect.
So if landlords are being faced with fresh squeezes to their incomes, should advisers assisting with buy-to-let mortgages be concerned?
According to Moneyfacts, five-year fixed rate buy-to-let mortgages are at their lowest rates on record – falling from an average of 3.77% in October 2016 to 3.4% in October 2018.
These products are the most popular amongst landlords, according to Mortgages for Business, with 73% opting for these options.
In terms of buy-to-let lending criteria, to take one stand out example, Tipton & Coseley have reduced their ICRs from 145% to just 125% for basic rate taxpayers, and 130% for those on the higher rate.
Similarly, they’ve reduced their minimum age threshold from 25 to 21 years old. This is of course just one example, but could be indicative of a greater shift towards reducing barriers to entry for new landlords.
And Unbiased enquiries are following suit. Enquiries submitted through the ‘buy to let’ key term still remain the third highest advice area for mortgages. They make up 17% of all mortgage enquiries, behind ‘first time buyers’ (37%) and ‘remortgage’ (30%).
In addition, the total number of buy-to-let enquiries has increased by 1.6% in the past six months.
What’s the Opportunity?
The removal of administration fees will, most likely, not hit you or your clients, but estate agents. According to the RLA, 70% of landlords are less likely to use an agent following the new Act.
Agents make things easier for landlords, but they don’t provide a service that landlords can’t manage themselves. If landlords will be increasingly opting-out of using agents, why not point them in the right direction yourself?
If you learn a basic checklist of requirements, such as the need for credit checks, referencing, drawing up an inventory and so on, you can sprinkle this into your client meetings for a more holistic, caring experience.
So with the market staying strong, and agents potentially on the out, why not use this opportunity to bolster your client relationship – showing that you understand their goals as much as you understand the products they need.