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RLA Hit Back At Rent Control Calls

RLA Hit Back At Rent Control Calls

Rent Controls Are Not The Answer
To The UK Housing Shortage

The Residential Landlords Association (RLA) have hit back at politicians and housing and homeless pressure groups who are openly calling for rent controls in the UK’s private sector by claiming that private sector rents are falling in real terms following analysis of the official English Housing Survey (EHS).

The English Housing Survey (EHS) results are taken from a continuous survey conducted by the Department of Communities and Local Government (CLG) and show that average private sector rents increased by just £10 from £153 to £163 (GBP) per week in 2014, representing a rise of 6.5%.

In contrast, average weekly rents in the UK’s social sector increased by more, with weekly rental prices increasing 25.4%, rising by £18 from £71 to £89 (GBP).

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With newspaper reports of rising rent arrears and tenant rent defaults, many landlords want to protect against the loss of rent. There are a number of specialist products available for landlords to use including Rent Guarantee Insurance.

Here Legal 4 Landlords, the UK’s leading provider of specialist products and services to landlords and the lettings industry, explain the benefits of rent guarantee insurance, as well as looking at some of the smaller print.

How it works

The Truth About Rent Guarantee Insurance

The Truth About Rent Guarantee Insurance

In theory, rent guarantee insurance can be a landlord’s proverbial best friend: if your tenant fails to pay their rent, the insurer will pay you instead.

The outstanding amount is then recovered by the insurance company from the tenants directly.

Of course, in some instances you may agree with your tenant to accept a delayed payment because of financial problems or other extenuating circumstances, and therefore would not need to make an insurance claim.

On the other hand, landlords may face difficulties of their own some months, and for around £120 a year rent guarantee insurance offers you piece of mind that your rent will be paid on time and in full when you most need it.

Relief for legal costs and void periods

Most good insurance policies will also include legal cover for the eviction of the tenant. Landlords should note that the eviction process can be a lengthy and costly period of time, the legal cover provides landlords relief in terms of time and money.

What’s more, as long as the eviction process started within the policy period, the insurance company will continue to pay your legal costs up to the policy limit even once the policy has ended.

In addition, most policies will pay 50% of the rent for up to 3 months after eviction whilst you find a new tenant. However, if policy ends during the eviction process you will of course have to renew the policy in order to receive this and your monthly rental payment.

The small print

Tenants need to be thoroughly referenced and credit checked in order to be granted the policy. Landlords should have had these checks done before the tenant moved in so there should be no additional costs.

Some insurers won’t allow claims for the first 3 months of the policy, and there may be an excess to pay that is equivalent to one months’ rent and landlords won’t receive anything without renewing if you are in the last month of an active policy.

It also means that there is little point in claiming for rent that is a month late unless you are sure the tenant will continue to not pay and/or you want to evict the tenant.

With only 30 days to claim after the rent became overdue, this can be a difficult judgement to make as your tenant may well intend to pay.

If you do agree to delay payment by more than 30 days, make sure you keep all your correspondence otherwise you won’t be able to backdate the claim if the tenant doesn’t end up paying.

Not only do you then lose another month’s rent on the excess, but it could void your policy altogether in some instances.

Policy renewals are not guaranteed. Unless eviction proceedings begin immediately, any tenant defaulting towards the end of a policy could stop you from being able to renew and so the eviction costs could have to be met by the landlord

The way that some other rent guarantee policies are set up means that the odds are stacked in favour of the insurance company.

Despite this, in a recessionary environment with decreased job stability even tenants with a good credit history may face financial difficulties, so it is very worthwhile for landlords to take action protecting against rent default.

Mortgage fraud is estimated to cost the UK economy £1 Billion (GBP) every year, according to the National Fraud Authority (NFA).

MyPropertyPowerTeam.com takes a look at the steps some bridging lenders are taking to mitigate fraud and how they vet the solicitors and valuers that they work with.

It is important to ensure that all mortgage lenders’ procedures and vetting measures are consistently in check, particularly for those lenders who outsource their professional services regularly.

In light of the increasing number of products and services being offered by lenders entering the short-term lending sector, the FSA are keeping a close eye on any poor practices.

But, are the systems and controls in place to detect and prevent mortgage fraud robust enough in the industry?

Banks and mortgage lenders are being extremely vigilant when looking at how vulnerable their own systems and controls could potentially be and in what places they can be improved.

The FSA are also keen to crack down on poor practices and in December 2011, they published a guide, entitled Financial Crime: A Guide For Firms.

This document provides guidance to firms on steps they can take to reduce their financial crime risk and is designed to help firms adopt a more effective, risk-based and outcome-focused approach to mitigating any financial crime risk, which includes examples of good and poor practice.

Many Bridging lenders have made substantial investments in ensuring that they mitigate fraud and are using both automated systems and human intervention to detect fraud.

Good bridging companies choose solicitors that they deal with very carefully and will have carried out due diligence to mitigate the risk of solicitor fraud. 

New systems actively search and cross reference data from all lender members and multiple government agencies for any indications of fraud including identifying and investigating potential fraud as well as money laundering and the identification of Politically Exposed People (PEP).

Want to avoid Mortgage Fraud?  Find a reputable mortgage broker here

Landlords Need To Educate Themselves To Take Advantage Of Products And Services Designed To Help Them And Their Tenants

Landlords Need To Educate Themselves To Take Advantage Of Products And Services Designed To Help Them And Their Tenants

If you are considering becoming a Buy-To-Let landlord you should calculate the costs involved and do plenty of research before taking any financial risk.

This is according to Sim Sekhon, spokesman for specialist landlord services provider, Legal 4 Landlords, who explained that many new landlords rush in without calculating mortgage repayments or repairs and maintenance to rental property. He said “There are an increasing number of property investors who have been forced to adapt their strategies due to the instability of the UK property market, and they have ended up as reluctant landlords, when they are unable to flip properties. They end up either self managing the property or handing to a letting agent to deal with, often forgetting to calculate running costs. Landlords need to remember that as far as rented property is concerned, profit without Rent Guarantee insurance is a long-term investment, and property maintenance and repairs will be a cash drain.”

Landlords must treat their rental properties as a business and calculate all of the necessary financial requirements of running it before purchasing an investment property, and investors should plan to reap the benefits both in the short and long term.

Mr Sekhon added: “Landlords can increase rental yields and reduce void periods by Tenant Referencing all applicants and using rent Guarantee insurance for all of their tenants. We have developed a range of specialist products and services for landlords and letting agents to get the most from UK Buy-To-Let whilst providing long term reassurance for tenants.”

The full range of all products and services offered by Legal 4 Landlords can be found here

Specialist Insurance can help landlords profit from property

Specialist Insurance can help landlords profit from property

An alarming number of small scale landlords, owning just a single rental property, who are experiencing increased void periods and growing rent arrears has doubled since the first quarter of 2012, according to research carried out by leading market research company, Business Development Research Consultants (BDRC Continental).

The results of the BDRC Continental survey show that 16% of single property landlords experienced increased void periods or growing rent arrears during the 2nd quarter of 2012, up from 8% in the first three months of 2012.

However, landlords with larger rental property portfolios are making healthy profits from the Private Rental Sector (PRS) as they maximise rental yields and take positive action to ensure a regular financial income, whilst keeping tenants happy.

Director of BDRC Continental, Mark Long, commented: “It is a tough time to be a private landlord if you have only one property in your portfolio. Over the last quarter, profitability has clearly taken a dive. Regardless of their size, there is no question the private rental sector relies on private landlords and, whilst a third may aspire to increase their property portfolio, they will only be able to achieve this goal and add to Britain’s privately rented housing stock if they can make a profit from that one property.”

Getting the best from property investment could be so much easier for the minority of small scale landlords if they would just educate themselves and take advantage of the specialist products and services developed to help them profit from property, such as Tenant Referencing, Rent Guarantee Insurance and specialist Landlord Insurance policies.

UK Private Rented Sector Survey by MyPropertyPowerTeam.co.uk

UK Buy To Let Landlords Want More Properties But Are Unable To Get Mortgage Finance

A new survey of Landlords in the Private Rented Sector (PRS) has discovered that only 20.2% ( 1 in 5 landlords) in the UK, were able to add fresh residential properties to their existing residential portfolio stock during 2011.

Property value growth expectations and the prospect of a regular income were the key drivers behind the property investment trend and only the lack of available mortgage finance, and/or financial know how, held back even more landlords from adding to their property portfolios.

Out of all the landlord insurance customers interviewed, 85% predicted that residential property values in the UK would remain the same for at least the next 12 months and private sector residential rents were expected to be considerably higher in 2013.

London led the way, after 87% of respondents said they believed that rents in the UK capital would continue to rise throughout 2012.

The data is from the PRS Landlord Survey carried out among subscribers by MyPropertyPowerTeam.co.uk during the last quarter (Q4) of 2011.

The data also showed that 59% of landlords have been investing for more than 5 years would hold onto their property until around the year 2025, however, the average holding period for UK PRS properties was around 15 years.

The appetite from property investors in the UK PRS for additional property assets is still extremely strong and the UK rental market is seeing demand outstrip supply as private tenants seek quality PRS accommodation. The current rental trend shows little sign of abating at present, despite all the UK Governments welfare reforms.

The UK Private Rented Sector is currently buoyed up by a growing population that is spending longer periods than ever living in rented homes, similar to the continental norm.

Landlords are making use of insurance products to protect their property assets and even Rent Guarantee insurance to ensure regular monthly rental income.

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According to the latest research data released by Halifax; “Average mortgage payments for new borrowers as a proportion of disposable earnings” were at their lowest in the second half of 2011, meaning that UK Residential Property affordability in the UK is at its best since 1997!

The Halifax data is obtained by tracking the affordability of residential housing in 386 local authority districts across the UK

Typical mortgage repayments for both First Time Buyers (FTB) and home movers, (as new borrowers) at the long term average Loan To Value (LTV) ratio stood at 27% of disposable earnings in Q4 (Fourth Quarter) of 2011.

Halifax said this is well below the average of 37% recorded over the past 27 years.

There was a modest fall in payments relative to earnings over the past year from 29% in Q4 of 2010 and mortgage payments have almost halved as a proportion of income in recent years from a peak of 48% in Q3 of 2007.

The Halifax data highlights lower house prices and reduced mortgage rates as being the main drivers behind the significant improvement in affordability.

Lower house prices and mortgage rates have resulted in significant improvements in affordability in most local authority districts since 2007.

Martin Ellis, housing economist at the Halifax said “The falls in house prices and cuts in mortgage rates in the last few years have resulted in a significant improvement in housing affordability for those able to raise the necessary deposit to enter the market. Mortgage payments for a typical new borrower are now at their lowest in proportion to earnings since 1997. The marked improvement in affordability was a key factor supporting housing demand in 2011. The prospect of an exceptionally low Bank of England Bank Rate over the foreseeable future should maintain affordability at favourable levels in 2012. This should support the market over the coming 12 months, helping to offset the impact of the downward pressures on demand from the ongoing difficulties faced by households regarding their finances and uncertainty about economic prospects”.

The data does not include remortgages or Buy-To-Let mortgages, whilst it may be great news for First Time Buyers and normal homeowners, it does little to reflect the UK BTL market for property investors, however with higher LTV products emerging for FTBs, it cannot be too long before the lenders realise that us investors do actually know what we are doing and we could even see the return of 100% mortgages….I can live in hope!

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Europe want control of UK mortgage lending

European Union Want To Regulate UK Buy To Let Mortgages

Eurocrats no longer concerned with the current Eurozone financial crisis, are sticking their noses into the UK Buy-To-Let mortgage market, with the proposal of a new EU Directive on credit agreements relating to residential property, formerly known as responsible lending and borrowing.

UK Landlords who had been investing in property prior to the 2007 credit crunch have witnessed the dramatic fall in the number of buy-to-let mortgage products made available since the peak of the market in July 2007.

Today (NOV 2011), investors only have access to a paltry 15% of the 3648 buy-to-let mortgage products that were available before the full impact of the credit crunch.

Now, to make matters worse, the European Union want some form of control for the UK Buy-To-Let mortgage market, as part of their proposed directive on credit agreements, reducing the already limited range of UK BTL mortgage products available still further.

The EU has set out plans to include UK Buy-To-Let mortgages with this regulation, changing the way property investors and landlords are assessed by lenders for their BTL mortgage loan.

Currently in the UK, the affordability of a Buy-To-Let mortgage is measured individually, by assessing the rent generated by each property against financing costs.

Typically a mortgage would be considered affordable by the lender if the gross rent covered between 120 – 135% of the finance cost of the mortgage.

This excess cover is meant to ensure that even if the interest rate rises or the landlord suffers a rental void they are still be able meet their mortgage obligations in the medium term.

In general it is a sensible system that aligns the affordability of the finance to the cash generative qualities of each investment property.

It also allows landlords on modest incomes to be able to purchase a property without having to rely on a substantial personal income to prove they can manage their investment.

This method of measuring affordability was only introduced in the mid 1990’s thanks to a number of lenders getting together to introduce the Buy-To-Let initiative to the property investing public.

Now, Europe wants us thrown back into the pre BTL lending dark ages.

The European Directive proposes that BTL lending will be regulated in the same way that residential lending is at present.

Under the new proposals, lenders will no longer be allowed to take into account rental income when assessing the affordability of a buy-to-let loan. This would have massive implications for the 1.3 million small landlords, many of which could face difficulties in refinancing their loans under the revised criteria.

The proposals are to be voted on in early 2012 and would become law by 2013 but who is the legislation trying to protect?

The latest figures from the UK buy-to-let mortgage market show that the current system is actually resulting in a lower rate of arrears on buy-to-let loans than on residential loans. (Currently 2.14% compared to 1.91% for buy-to-let loans).

These new European directives go against current UK thinking, with the Council of Mortgage Lenders, (CML) against regulation and institutions such as the Building Society Association are completely against the new European proposals. Even the UK Treasury examined the need for Buy To Let regulation 2 years ago and decided against taking any action.

The new European Union mortgage directive is primarily concerned with the protection of consumers and including buy-to-let is unjustified.

A buy-to-let mortgage is a commercial transaction and most landlords have enough knowledge and experience to make business decisions without protection from the law and without evidence of detriment to the consumer it is unnecessary to impose such a limiting European regulation.

 

Best Buy-To-Let Mortgage Products November 2011

 

Lender

Type

Rate

Period

Fees

LTV

ERP

Rental

Woolwich Fixed 4.39 02.01.14 £1,999 75% 6 Months Interest 125%
Aldermore Fixed 4.48 2 Yrs £1,999 75% 5/4% 125 @ 5.98%
Woolwich Fixed 4.99 02.01.17 £1,999 75% 6 Months Interest 125%
TMW Fixed 5.79 31.01.14 2.50% 80% 5% 125 @ 5.99%
Kent Reliance Fixed 5.99 2 Yrs 1% 85% 4/3% 125 @ 5.99%
Woolwich Tracker 3.99 Term £1,999 75% 6 Months Interest 125 @ 4.99%

 

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There Will Never Be A Better Time To Invest In Property

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