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Government Issue Response To Tax Relief Petition

Government Issue Response To Tax Relief Petition

Government Issue Muted Response To Tax Relief Petition

The Government has published a response to the online petition that opposes the proposals to change the amount of tax relief on buy to let mortgages announced by the Chancellor, George Osborne, in the post election summer budget.

From April 2017 onwards landlords will only be able to claim the basic rate tax relief rather than the higher rate tax relief on buy to let mortgage payments. It is widely feared that the move will severely affect the profitability of the private rented sector (PRS).

The online petition to reverse the planned tax restrictions on individual landlords has attracted more than 23,600 signatures since being posted.

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Owning Property Is Better For Financial Security

Owning Property Is Better For Financial Security

Mortgage Payments Vs Savings: Property Provides Better Returns Over Traditional Saving Methods

There was a report in the Daily Express last week that said property owners have saved more than others with traditional savings accounts and ISA’s.

The report reckoned that the Bank of England’s record low interest rate has saved property owners almost £20,000 (GBP) over the last six years in inflated mortgage payments. However traditional savers have lost out by almost the same amount, prompting calls for more help for savers and warnings that borrowing could create a new debt crisis.

Bank of England statistics reveal that the record low interest rate of 0.5%, reached 5 years ago today, has been a mixed blessing for the UK.

Interest rates started to tumble back in 2008 and by March 2009 the Bank of England’s base rate had reached 0.5%, promoting cheaper borrowing.

Property owners with a £100,000 Standard Variable Rate (SVR) mortgage could have saved almost £20,000 (GBP), because mortgage payments were around £3,300 (GBP) a year lower than they were in early 2008 before the financial crash ended the previous property boom.

Savers with £100,000 (GBP) in cash ISAs lost around £18,500 (GBP) over the same period.

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Mortgage repayments have fallen by more than two-fifths in Scotland when taken as a proportion of income

 

Scotland is best place to get a mortgage

Scotland is best place to get a mortgage

Mortgage payments have fallen from a peak of 38% in last quarter of 2007 to just 22% in the final quarter of 2012, according to research conducted by Bank of Scotland.

Lower residential property prices and reduced mortgage rates have been the main driving force behind the significant improvement in affordability.

The average monthly take-home wage in Scotland is £1,954 (GBP) while the average monthly mortgage payment is just £424 (GBP).

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Get Into Buy To Let While You Still Can

Buy to let provides long term security

Property investors should still be benefiting from lower mortgage repayment rates, as many will have now reverted back to their lender’s Standard Variable Rate (SVR) and the record low Bank of England (BoE) base rate remaining at 0.5% has certainly done property investors a huge favour.

This is of massive benefit to property investors as a lot of buy-to-let mortgage deals do not have typical SVR’s but they do revert to a rate that tracks the Bank of England base rate.

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Getting a mortgage to purchase property saves money, according to Barclays, who’s research suggests that people will save almost £200,000 (GBP) over their lifetime by buying property rather than renting.

The bank put the average cost of renting a residential property over 50 years at £623,000 (GBP), compared to just £429,000 (GBP) for buying a property, paying a mortgage and maintaining home – making a difference of £194,000.

The Barclay’s study said that around 50% of expenditure goes on mortgage payments, with around 40% going on capital repayment and interest costs, over 50 years of home ownership.

Barclay’s head of mortgages Andy Gray said that whilst the initial cost of getting on to the property ladder “can be a big barrier” for people, due to high value of deposits now required, there are still clear long-term benefits.

As inflation rises, so does the value of owning a property. While rental prices rise and fall with inflation, once a residential mortgage is paid off, all a homeowner has to pay for is the maintenance of the property and annual insurance to protect it.

While it may be cheaper to rent in the short-term, over the long-term PRS rents will inflate and tenants will be no nearer to owning property, whereas after 25 years, a home buyer will own their home outright and have financial security in their retirement.

If only getting a mortgage was that easy…..

2012 Buy-To-Let Mortgage Numbers Increase By A Third

2012 Buy-To-Let Mortgage Numbers Increase By A Third

There are fresh fears that First-Time Buyers (FTBs) and next time buyers are being forced out of the UK residential property market by Buy-To-Let landlords.

The Council of Mortgage Lenders (CML) said that 32,300 Buy-To-Let mortgage loans were made over the first quarter of 2012, a 32% increase on the first three months of 2011.

Meanwhile, according to chartered surveyors E.serv, the number of residential property mortgages lent to first-time buyers in April 2012 fell to their lowest level for 9 months. The company said that loans made to first-time buyers in April numbered just 11,307, a drop of 5% from March 2012 and the lowest since July 2011.

Mainstream mortgage lenders are increasingly reluctant to accept applications from First-Time Buyers due to low Loan-To-Value (LTV) rates and the size of deposit required. Instead there is a preference to lend to Buy-To-Let landlords, who are less likely to default on mortgage payments because they are able to utilise specialist Rent Guarantee insurance products to keep cashflow constant.

Richard Sexton, business development director at E.serv, said “Mortgage companies have begun to scale back lending to first-time buyers. Buy-to-let landlords are taking the places of first-time buyers as there is an absence of them in the market place because they can’t get loans. The UK housing market would be in a far worst place than it is now if it were not for the return of buy-to-let landlords”.

Chief Executive of Dragonfly Property Finance, Jonathan Samuels, said “There has been a seriously sharp spike in mortgage loan applications for buy-to-let properties in the first four months of 2012. A shortage of rental stock and strong demand from the growing number of tenants forced to rent will keep driving the sector forward. There’s a lot of portfolio building, as investors continue to add properties to give them increased exposure. People are seeing Buy-To-Let as a pretty stable place to be because residential property prices are falling and mortgage lenders still see lending to owner-occupiers as risky. Investors feel that there’s a lot left in the buy-to-let market and are putting their money where their mouth is”.

However there are warnings that buy-to-let landlords will need to know what they’re doing when it comes to best rental practices and should take appropriate measures to protect their rental income, such as thoroughly referencing tenants and ensuring Rent Guarantee insurance is in place. Landlords should also be prepared for Bank of England interest rates to rise anytime within the next 12 months as the UK struggles to escape the grip of recession.

The CML said that although lending to buy-to-let landlords has grown sharply in the last year, it is still at only 30% of 2007 levels.

With average loan-to-values on buy-to-let mortgages at 75% and average minimal rental cover at 125% it is unlikely that Buy-To-Let mortgage lending will recover to the same levels seen in 2007, as 25% deposits will prevent many amateur landlords from buying rental property.

UK Government Housing Minister, Grant Shapps, said: “We do not have to make a choice between first time buyers and buy to let. We need both. And while a third of all mortgages went to first time buyers last year, only 12% went to buy-to-let landlords. But I’m determined to pull out all the stops for those who want to get on the property ladder, which is why in March the Prime Minister and I launched the NewBuy Guarantee scheme which is expected to enable up to 100,000 aspiring homeowners to buy newly built properties with just a fraction of the deposit they would normally need.”

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