Despite the fact that Britain is yet to trigger Article 50, which gives it two years to negotiate the exit from the EU, already there have been recent moves by the banks to curb BTL lending and gloomy warnings for the housing market from the Treasury.
But is this all a knee jerk reaction? Should landlords and investors be concerned?
Newcastle BS, Barclays, and Foundation Home Loans and TSB recently announced that they are curbing BTL lending , with TSB increasing rental coverage ratio by 20% to 145%. For LTVs up to 65% the rental cover calculation will be 145% or 5% of the pay rate, whichever is higher. For LTVs between 65.01% and 75% LTV the calculation will be 145% or 5.5% of pay rate.
However, challenger bank bosses have shrugged off Brexit concerns and remain committed to their lending practices, in spite of warnings over risky loan exposure arising from the vote to leave the EU. Shawbrook, Metro Bank and Virgin Money reported strong first-half results, thanks to a surge in lending to both individuals and companies.
A new forecast from estate agency Countrywide, said that house prices will fall just 1% across the country in 2017, before rising by 2% in 2018. However, Countrywide has said that the cooling market was not just down to uncertainty about Brexit and has highlighted the impact of stamp duty increases on the market.
According to Peter Armistead of Armistead Property, there has been an over reaction from the banks, at a time when we have no idea what the consequences of Brexit will be for the BTL market. He comments: “It is worth taking all the scaremongering with a pinch of salt. While the future for the BTL market looks certain, what is clear is that mortgage interest rates remain very attractive. BTL investors who are in a position to buy now could benefit from not only low mortgage rates, but lower property prices.
“The BTL market is strong and continues to provide essential housing for a growing UK population. It is estimated that two million Britons are now private landlords, collectively renting out five million properties. With rising demand for rental property and a growing shortage of accommodation, the buy-to-let market will continue give a good return...
“Even before Brexit, the BTL market was slowing, due to the new tax measures introduced by the Chancellor. Although the government is trying to curb the buy-to-let market, property investment is robust in the long term. However, lending may be further constrained and the banking industry may be hit harder in a few years.
“So far, figures from the Halifax and Nationwide show a slowdown from earlier in the year, when many investors rushed to get deals done before April 5. However, the market has not seen the type of falls that ‘Project Fear’ was predicting before the Referendum. The slowdown is pretty much in line with seasonal expectations following the bull market of January to April 2016.
“The market does not like uncertainty and we may have several years of this, along with potentially more issues to deal with.”
Peter Armistead is a property investor with 100 properties in Manchester. Peter personally owns properties as through his company, Armistead Property. Back in the early 2000s, Peter had a business plan of having three separate areas to invest in and chose London, Manchester and Whistler, Canada.
The idea was that these were three different property cycles, with different property types, so on average whilst one market may be slow, the other two would be better. He changed this approach 10 Years ago and decided to concentrate on one location – Manchester. Now Peter only invests within a mile or two of Chorlton, South Manchester.
For further information, visit www.armsteadproperty.co.uk©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law; always seek professional advice. Legislation changes, so check dates on these articles. If you have questions go to the LandlordZONE® Forums