Does buy to let still present opportunities for brokers? What innovation does the future hold for this market? And what benefits are there for brokers looking to expand into this sector?
Listen in to the latest podcast from Accord Mortgages in which Ying Tan, Dynamo for Intermediaries’ founder and chief executive, is interviewed on all things buy to let by Chris Maggs, Senior Commercial Manager at Accord BTL.
https://blog.accordmortgages.com/podcast-35-buy-to-let-in-2020-whats-in-it-for-brokers
No two landlords are the same. There are those who fall into the ‘accidental’ landlord bracket and at the other end of the scale we have professional landlords who have built a business around their property portfolios. Somewhere in between, we have people who have purchased additional property for short-term investment/refurb purposes, for their children to live in when at university, to talk about at dinner parties and/or as part of a pension pot. In short there are many reasons why people have become landlords over the years.
Since the turn of the year there has been a plethora of images all over social media showing photos of people comparing themselves from the start of the decade to the end of the decade.
This outpouring also reflects just how much social media and technology has dominated the 2010s. Instagram in particular has become a digital oasis for millennials and Gen-Zers to share more of their personal lives. After being acquired by Facebook in 2012, the photo-sharing network has grown to over a billion registered users as of last year. This makes it one of the most impressive growth businesses over the past decade and also home to a whole new way for individuals and companies to build brands and generate income.
Around this time last year, I completed a search on relevant BTL news and quickly noticed a pattern which kept diverting me to the same website – a provider of financial advice for investors.
I remember being somewhat taken aback at the sheer volume of articles produced around a similar topic which included “forget buy-to-let” (as an investment vehicle in 2019) in the headlines or words to that effect.
When embarking upon a repeat search just now, similar phrasing and headlines were still visible but the volume of such articles on the first three pages of the Google search engine was noticeably fewer.
So, what can we take from that?
Last month I looked at how the value attached to the advice process should never be underestimated. This was alongside the importance of intermediaries getting to grips with the varying challenges facing landlords and the potential raft of buy-to-let solutions on offer.
A strong component within this is maintaining a wider knowledge base and keeping track of trends along the way. Of course, this isn’t always easy, and it remains the responsibility of landlord clients to undertake their own research and due diligence before entering into any purchase or remortgage.
However, good advice and adding value – even if it’s simply pointing them in the direction of relevant articles, news stories or reports in the trade press – can often be the difference between a one-off customer and a long-term client.
I recently noticed a headline ‘UK landlords failing to keep pace with PRS reforms’, which made me wonder just how many landlords are still either ignoring, or are unaware of, legislative and policy reforms throughout the UK rental market.
Whilst reflecting on this, it seems apt to reaffirm some of these changes.
Mortgage interest tax relief
Mortgage interest tax relief will continue to be phased out. Landlords are no longer able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs. For the 2019–20 tax year, landlords will only be able to deduct 25 per cent of their mortgage interest. And from April 2020, they won’t be able to deduct any.
Lettings fee ban
To buy or not to buy? That is the question in the midst of economic conditions which are making it tough for many potential borrowers to make life-affirming, property-related commitments.
Although first-time buyers remain the bedrock of the mortgage market – and it’s important that the younger generations remain attracted to homeownership – times are changing. A range of consumer demands need to be fully catered for and shifting social demographics to be considered throughout the lending and private rented sectors. For example, some tenants are opting to rent for longer as it fits better with their current lifestyle. Some tenants simply don’t have a choice. Flexibility can be a key factor for many, and this is even more apparent when you consider the changing face of employment throughout the UK and the effect this is having on how property is being viewed and utilised.
Looking from the inside out, it’s cringe-inducing to think of how the rest of the world is currently viewing the UK’s political plight. Don’t worry, this is not going to be a political or Brexit-related rant. It’s all about perception and maybe, just maybe, the rest of the world isn’t looking at the UK economy with as much disdain as we may initially think, especially when it comes to the housing and buy-to-let markets.
