The Future of Buy to Let in 2019...Keystone Portfolio Landlord Policy Conversion tool available to...
Transcript of The Future of Buy to Let in 2019...Keystone Portfolio Landlord Policy Conversion tool available to...
The Future of Buy to Let in 2019
David Whittaker
CEO
Keystone Property Finance
The BTL Market in 2019 – 2 perspectives
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“We are witnessing the real time shakedown of the buy-
to-let market.
“Since the start of the last year but more so in the
quarter leading into this January – our phones have
been ringing off the hook with landlords looking for
solutions…for the first time we have seen a substantial
number of landlords looking for a loan to cover their
January tax payments.”
“If there is any sector that is used to adapting to
change, it’s buy to let.
“For the first time in a number of years buy-to-let
landlords can look forward to a period without
intervention and so amongst political uncertainty there
is at least a clear outlook for property investors.”
Jo Breeden
Managing Director at
Crystal Specialist Finance
Barry Searle
Managing Director at
Castle Trust
Impact on landlord of 2018 legislation
HMOs – new HMO mandatory licensing rules
o Implemented on 1st October 2018
o Removal of the 3 storey rule – all houses with 5 or more people from 2 or more households now require a license
o Extension of mandatory license to flats above and below business premises
o Set minimum room sizes
o Single room must be at least 6.52sq mtrs
o Double room must be at least 10.22sq mtrs
o Non-compliant landlords could face criminal prosecution of fines of up to £30,000
Where a license is not obtained landlords cannot evict a tenant & tenants can reclaim the rental income that they
have paid.
o All BTL properties will be required to meet this minimum standard from 1st April 2020
BTL Minimum Energy Efficiency Standards (EPCs)
o Implemented on 1st April 2018
o Minimum required EPC rating of E or above
o New regulations make it illegal to rent a property with EPC ratings of F or G
o Affects all BTL properties purchased or renewal of tenancies from this date
o All BTL properties will be required to meet this minimum standard from 1st April 2020
Impact on landlord of 2019 legislation
Homes fit for habitation
• Started as private Members Bill (Karen Buck & Lord Best)
• Homes (Fitness for Human Habitation) Act 2018
• Enacted on 20th December 2018
• Normally applied 3 months after enactment
Ban on tenant fees
• Tenant Fees Bill 2019
• Back from Lords to Commons
• Due to enact on 1st June 2019
• Will these costs be absorbed or passed onto higher rates?
Client Money Protection – 1st April 2019
Have to be a member of an APPROVED Client Money Protection Scheme
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Impact on landlord of continuing tax changes
• Mortgage Interest Tax Relief Cuts
The formula over 4 years (Chancellor – 8th July 2015)
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Tax Year Restriction on interest to basic rate tax
2017/2018 25%
2018/2019 50%
2019/2020 75%
2020/2021 100%
Which impacts by 31st January the following year.
• SDLT in Scotland – rise from 3% to 4% from 2025
Impact on landlord of SS13/16
• Adds to debate on benefits of Ltd Co ownership
o 44% of all our applications are now in a Ltd Co structure
o Average loan size is no different from personal name applications
• 4 or more mortgaged properties – background portfolio check
o eTech now have
o 1,400 broker firms
o 3,500 registered individual brokers
o An average of 13 properties in each portfolio
o Largest portfolio processed was made up of 169 properties
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Keystone Portfolio Landlord Policy
✔ Conversion tool available to convert clients portfolio spreadsheet into acceptable format.
✔ Entire portfolio to be stressed at 125% @5.5%
✔ All properties to have 100% rental cover
✔ Portfolios geared above 80% will not be accepted
✔ AVMs to be used to verify landlords valuation and rental information
✔ eTech (Buy to Let Hub)
To comply with the PRA guidelines and underwriting requirements where the client owns four or more
mortgaged properties the following information will be required:
eTech Buy to Let Hub Lender Dashboard
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£44.6
£27.2
£8.5
£10.4
£14.2£16.4
£20.7
£27.4
£37.5
£40.6
£26
£20
0
5
10
15
20
25
30
35
40
45
50
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
£Bn
£32
Buy-to-let lending: past & present (2018)
Source: CML/UK Finance | Keystone predictions | Keystone Ltd Co lending predictions
£3.5£6
£8
£32.3
£35.8
£28
Impact on brokers of changing finance arrangements
• Product mix
• Commission rates (with apologies to BM Solutions) and mix
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2016 2018
2yr & 3yr 78% 35%
5yr 22% 65%
2016 2018
Mainstream 0.45% / 75% 0.45% / 55%
Specialist 0.55% / 25% 0.60% / 30%
PTs 0% / 0% 0.25% / 15%
• Try modelling your future revenue over the next 5 years on both structures
• Lenders should be beginning to consider a new way forward to reflect ADVISORY rather than TRANSACTIONAL
relationship.
£44.6
£27.2
£8.5
£10.4
£14.2£16.4
£20.7
£27.4
£37.5
£40.6
£28
£24
0
5
10
15
20
25
30
35
40
45
50
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
£Bn
£35
Buy-to-let lending: past, present & future (2019)
Source: CML/UK Finance | Keystone predictions | Keystone Ltd Co lending predictions
£3.5
£7£9
£32.3
£35.8
£33
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Any questions?