The Chancellor has announced that stamp duty is to be abolished for all first time buyers on properties bought up to £300,000, effective from today. In addition, first time buyers purchasing properties up to £500,000 will pay no stamp duty on the first £300,000.
In his Budget, Philip Hammond announced that 80% of first time buyers would pay no stamp duty at all. With 358,000 first time buyers in the last year, this means that at least 24% of all sales in the UK’s housing market are set to be charged 0% tax. Once other exempt sales under £125,000 are taken into account, this figure will be even higher.
Two thirds of properties bought so far this year across the country have been under the new threshold but there are large regional variations. In Wales and the North East, over 90% of sales in the last year have been over £300,000 while just 17% of sales in London were for less than £300,000.
While good news for first-time buyers, this will further squeeze investors in the sub-£500,000 market who are already suffering from increased taxes. What's more, it does not, give any encouragement to owners higher up the chain to downsize.
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Portfolio landlords – those with four or more mortgaged buy-to-let properties – now face more stringent checks by lenders when buying additional properties.
Since the end of September, new portfolio lending rules issued by city watchdog the Prudential Regulation Authority mean that lenders must look at a landlord’s entire property portfolio when deciding whether to offer them a buy-to-let mortgage on a property.
The rules have been introduced to provide lenders with greater certainty that landlords will definitely be able to afford any additional borrowing they take on.
Different lenders, different approaches
Many lenders have confirmed that they will continue to provide buy-to-let mortgages to portfolio landlords, although they will require much more information about their existing properties before they will accept a new application.
Other lenders, however, put off by the longer underwriting process and an increase in paperwork, have taken the decision to move away from lending to portfolio landlords following the rule changes.
Some have said that although they are not prepared to accept new applications for additional buy-to-let lending from portfolio landlords, they will still consider remortgages, but only if they are on a like-for-like basis.
What portfolio landlords can do to prepare
Landlords with multiple properties who are planning to add to their portfolios can help speed the mortgage application process along by making sure they have all the information lenders will require ready in advance.
Lenders will want to understand any existing mortgages already in place, as well as the amount of rental income each property in the portfolio brings in, along with any expenses, such as maintenance costs. They are also likely to look at your assets, liabilities and cash flow. This is so they carry out an assessment of affordability right across the portfolio, to be certain that you won’t be over-exposing yourself financially by increasing your borrowing.
There are other rules which have recently come into effect which also affect landlords. For example, lenders now need to impose a ‘stress test’ for the first five years of the loan when you apply for a mortgage, so that they can check you’d still be able to afford monthly payments if rates go up.
However, they may adopt a more flexible approach if you are applying for a five-year fixed rate buy-to-let mortgage as if rates do increase during this period, your monthly payments won’t be affected.
The Guild has partnered with L&C Mortgages, the UK’s largest fee-free mortgage broker. You will be able to get expert advice at the end of a phone when it suits you. Their expert advisers are on hand 7 days a week and will manage a full search of the mortgage market so you don’t have to.
Over 1 million people have come to L&C for fee-free expert mortgage advice, so you know you can trust them to help you too
Call L&C today on 0800 923 1945 or click here to request a callback.
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