Eden Upton

Eden Upton

Eden Upton writes articles and press releases for mortgages, auction finance, repossession and bridging loans. His publications have received starred reviews in Real Business, Business Matters, The Good Men Project and Global Finance. Before he started writing finance, Eden wrote for big brands such as djkit.com, NHS, Nando's and Boots. His passion for writing finance grew when he started researching the bridging and mortgage industry for UK Property Finance and sourcing the best rates, finding the best deals online for homeowners.

Landlords Create Limited Companies to Run Buy-to-Let Properties

Many landlords across the UK are opting to create limited liability companies to manage their buy-to-let property portfolios. Although this is becoming more and more popular, there are some considerations that need to be taken into account before taking that step.

According to data provided by Hamptons, there were in total 41,700 new limited companies formed for this purpose, a leap of 23% since 2019. This trend looks set to continue, but is it the best choice for BTL landlords, and what are the considerations that need to be looked at?

Tax relief

When operating through a limited company, landlords are able to claim mortgage interest relief and are subject to a lower income tax rate due to the fact that they will be paying corporation tax as opposed to paying income tax on any profits made.

Private landlords are restricted when it comes to mortgage interest relief, which for them is limited to the basic rate of income tax, meaning all earnings from rental will be subject to taxation.

Typically, due to high mortgage interest rates, the advantages of setting up a limited company for BTL properties tend to be more beneficial to those in a higher income bracket or landlords with large property portfolios. It’s always vital to speak to an expert tax advisor before making a decision.

Interest rate increase

Over the last few years, we have seen low-interest rates, which has resulted in finance costs being kept to a minimum. However, with the recent interest rate increases from the Bank of England and the rising cost of inflation, we can expect to see rising interest rates on the property market too.

The impact on landlords will be significant due to the expected rise in interest rates once their fixed interest rate period comes to an end.

Property market trends

Post-pandemic lifestyles for many UK citizens have seen significant changes in the way people live and work. Priorities in what buyers are looking for have shifted, with many continuing to work from home on a full-time or part-time basis. There has been a marked increase in people moving out of big cities and opting to buy homes in towns and villages, making it important for landlords to do the relevant research and ensure that they are investing in the right areas.

Limited liability

Limited liability protects landlords’ personal finances and assets, meaning that landlord liability is restricted to the value of their financial investment in the company.

This liability can be further protected by taking out personal liability and personal indemnity insurance.

Reporting and record-keeping requirements

As a limited company, you are required to maintain up-to-date financial records, which must be filed at the end of each financial year. Company accounts and an annual tax return must be sent to Companies House together with the landlord’s usual annual self-assessment. A disadvantage of this is that it will almost certainly result in increased accounting costs.

Preparing for the future

It is important for landlords to know what their future plans are with regard to their rental properties. If they intend to pass on property ownership to a family member, then it is better to form a limited company, as it makes the process simpler and more tax-efficient.

Choosing the right mortgage product

Typically, mortgage rates for limited companies tend to be higher than those taken out by individual buyers. Despite this, there are specialist lenders that provide competitive-rate mortgages, which are best accessed through a whole-of-market broker.

It is important to note that the criteria for a limited company mortgage require the business to be set up in one of the following ways:

A trading company is usually a business already in existence that is planning to increase its assets by investing in buy-to-let property.

Special Payment Vehicle: a company set up for the express purpose of purchasing and managing buy-to-let properties.

Taking all the above into account will help landlords make the important decision of whether it is more or less advantageous to set up a limited liability company to manage buy-to-let properties. Employing the services of a tax expert and an experienced property broker will significantly increase the chances of making the right decision.

Investment in Empty Properties Could Help to Ease the Housing Shortage

Property Mark has stated that new incentives should be offered to property developers to encourage them to invest in vacant housing. Across the UK, there are thousands of empty properties, which could effectively help ease the ever-growing housing shortage.

The trade body, which represents property professionals such as estate agents, letting agents, and auctioneers, has called on the government to re-instate the ‘Empty Homes Programme’, which ended in 2015 after having distributed £100 million.

Property Mark has also asked the government to consider the removal of VAT on home improvements, including home efficiency upgrades. They are also requesting that they look at offering discounts or exemptions on stamp duty and council tax for developers buying empty homes.

The trade body welcomed the government’s recently released Levelling Up White Paper, created to address this issue, but implored ministers to go a step further and “explore a scheme that targets owners of empty homes”. The recommendations are not entirely unlike the previous White Paper, which was created with the intention of giving local councils the power to enforce rules on owners to ensure that their properties are not left vacant long-term and for them to find suitable tenants.

How many vacant properties are there?

The number of empty homes is 20% higher than it was at the end of the previous national Empty Homes Programme. According to Action on Empty Homes, there are currently 238,306 empty properties in England, which is a figure not too far from the government target to build 300,000 new homes per year in an attempt to keep up with the ever-increasing demand for housing.

The government has missed its target by quite some distance, with only 228,370 new homes being completed in the year ending September 2021. The increasing demand for housing and the historically high lack of supply are serious problems for the property market.

“Empty homes are a wasted resource, and at a time when the housing market is in the grip of unsustainably low levels of stock for sale and for rent, it makes no sense that there are thousands of homes sitting vacant,” Timothy Douglas, head of policy and campaigns for Property mark, commented.

“We have long called for the reintroduction of a national programme of funding because of the much-needed incentive that it can provide to get these properties back into the market for would-be home buyers or landlords.”

He added: “The UK government has set itself a target of building 300,000 new houses a year, but it must not miss opportunities to do more to better manage the growing level of existing housing stock that is currently being underused, or not used at all.”

This week, from February 28th to March 6th, is National Empty Homes Week, which is an initiative to help councils identify and bring empty homes back onto the property market for rental or sale. With more than 260,000 properties in England sitting empty for at least 6 months, it is vital that councils address these issues to help increase supply.

As an example, the city of Salford has, at this time, 2,392 properties that have been empty for at least six months. The Salford Council has been actively working in conjunction with property developers and investors on a mission to bring these properties up to scratch and find tenants.

“Salford is in the midst of a housing crisis, and we take the issue of empty properties extremely seriously as we know that there are so many families and residents in our city that could make them a home of their own,” Deputy City Mayor Councillor Tracy Kelly, Lead Member for Housing, Property, and Regeneration, said.

She added: “Our dedicated team deploys a wide range of tactics to bring these homes back into use, and we have strong partnerships with local housing associations who help us refurbish them and find new tenants who are in need of a good-quality home.”

She continued: “We offer landlords a number of options to find a solution for an empty home, and we will not hesitate to use enforcement powers, such as serving improvement notices, to ensure the home is habitable. I would urge landlords to work promptly with our teams to ensure that properties can be ready for use as soon as possible.”

Salford Council is offering grants to landlords and investors in a scheme they have called the Private Sector Leasing Scheme, which provides assistance with the refurbishment and upgrade of properties to a liveable standard. The scheme requires a 30% contribution from the applicant and must be managed for a minimum of 5 years with affordable rental rates.

Relaxation of COVID Restrictions Triggers Spike in Ex-Pat Mortgage Interest

Specialist brokers across the UK have reported a major spike in mortgage interest among ex-pats over recent months, credited largely with the loosening of COVID-19 restrictions and the reopening of the country’s borders.

Expat Mortgages UK managing director, Daniel Yorke, said that while there had been a “gradual increase over the past 12 months”, the last three months in particular saw a more rapid increase in activity.

Analysts are now predicting even faster growth in the near future, with particularly heavy emphasis on the growing popularity of BTL investments among overseas investors.

Speaking on behalf of Knowledge Bank, operations director Matthew Corker noted a major uptick in the number of ex-pats looking to purchase private rental properties in the UK.

“While the growth has been steady in residential searches, there has been a significant increase in ex-pats looking for BTL properties. Partially driving this interest is the volatility in the stock market, coupled with UK house prices exceeding all growth expectations,” he said.

“Lenders are also reacting to this trend, and there have been more and more products added for expat borrowers. With house prices and rents looking set to keep increasing, we anticipate this growth to continue in 2022.”

Specifically, Mr Corker stated that while standard expat residential searches were up by around 7% year-on-year, searches for buy-to-let properties increased by around 16% during the same period.

Anthony Rose, co-chief executive of LDN Finance, likewise noted a significant increase in the number of ex-pats demonstrating an interest in BTL mortgages.

“Most of our enquiries have been expats returning to the UK looking to buy, or they’re refinancing their existing UK properties,” he said.

“However, we have also noticed that the end of the stamp duty holiday and strong property market post-Covid have played a vital role in clients obtaining expat mortgages for BTL properties.”

Mr. Rose went on to highlight the potential challenges being faced by such borrowers, for whom product availability is limited at best.

“It’s a small, niche space that can involve placing square peg clients in round holes. Often, expats have bespoke circumstances that require providers to have a flexible approach to lending,” he said.

“A classic example is the intended date of return home; some lenders require a specific date, whereas others need some ballpark timelines. Naturally, these times can change, so it’s difficult for clients to pinpoint them precisely. Lenders need to be mindful of this.”

Chris Sykes, associate director and mortgage consultant at Private Finance, suggested that growing interest among overseas investors could breathe new life into London’s fairly lacklustre property market.

“We do now see this as an area that we expect to grow post-pandemic, especially as London returns to life, and with prices having stagnated in the capital, this could be an attractive time for expat buyers and, importantly, investors,” he said.

He went on to say that it “remains to be seen” whether market activity will soon return to pre-COVID norms but indicated that the release of a “great deal of pent-up demand” following two years of stagnation could be on the horizon.

Subsidence: How to Spot it, What to Do

If you own your home, there is little more disconcerting than the appearance of a large crack in one of your walls. Some cracks are purely cosmetic and have no cause for concern, but others could be an early indication of subsidence.

The question is: what can you do if you spot the signs of subsidence or believe your home may be at risk?

How can I spot the warning signs of subsidence?

Local mining activity and issues with soil are the two main causes of subsidence. One of the earliest and most common indications of subsidence is the appearance of diagonal cracks in walls, which are wider at the top than at the bottom.

Windows and doors that start sticking for no apparent reason can be indicative of subsidence, as can wallpaper that begins tearing with no obvious cause. In all instances, a survey should be conducted at an early stage by a qualified professional.

Precautionary steps can and should be taken by homeowners to reduce subsidence risk. Examples of this include periodically checking guttering and water pipes for leaks, pruning trees and shrubs to prevent the soil from drying out, and laying porous materials (like grass or gravel) around the property.

However, subsidence caused by local mining activity or major soil issues cannot usually be prevented with these basic precautionary measures. Homeowners in areas where subsidence risk is elevated must therefore check their buildings’ insurance in order to ensure they have the appropriate level of coverage.

If you believe you have spotted an early indicator of subsidence, call your insurer immediately. They will tell you what to do next, which will usually include hiring a contractor to examine your property and determine the cause of the issue.

Most issues with subsidence are fairly minor in nature, resulting in equally rudimentary damage that can be repaired right away. But there is also the possibility that the subsidence detected could be ongoing, which will call for a more comprehensive long-term solution. The foundations of the property, for example, may need to be repaired and strengthened to prevent any further damage.

Does home insurance cover subsidence?

Whether you are covered against subsidence will be determined by your policy’s terms, inclusions, and exclusions. A good home insurance policy will cover most types of structural damage caused by subsidence.

Cover may also be provided for temporary accommodation costs if it becomes necessary to leave your home temporarily during the repairs.

Ensuring you are covered against subsidence is advisable, given the potentially high costs of funding the repairs out of your own pocket. A typical subsidence repair can easily cost tens of thousands of pounds, depending on the nature of the damage.

What if I want to sell my home?

You are legally obliged to inform prospective buyers of any issues with subsidence affecting your home, rather than attempting to hide them.

This need not be an issue in all instances, as a study carried out by LV found that 43% of prospective buyers would still go ahead with a purchase after being told of issues with subsidence. In addition, 7% said subsidence does not concern them at all when looking to purchase a property.

Either way, it is in your best interests (and those who take an interest in your home) to ensure the necessary repairs are conducted fully and professionally ahead of time. Not just for peace of mind, but to make sure you get the best possible market price for your home.

UK Property Market’s Seemingly Endless Acceleration Continues

The overwhelming majority of UK homeowners saw the market values of their properties skyrocket throughout the course of last year. Newly released figures from Zoopla indicate an average annual price increase of 7.1%, equating to around £16,000.

Year-on-year, average house prices climbed from £224,800 at the end of 2020 to £240,800 in December 2021. Throughout the course of the year, a total of 1.5 million property transactions were recorded, the highest number of completions since the financial crisis.

In addition, the figures from Zoopla show that house prices increased in almost every UK region at a faster rate than in both 2019 and 2020 combined.

One of the market’s key drivers was the frantic race for space triggered by lockdown restrictions, as buyers abandoned busy urban centres in search of more spacious rural homes with private gardens.

Available inventory was quickly eradicated, leading to astronomic price hikes in desirable areas of the country.

“Such a busy market eroded the number of homes available to buy, as properties were being snapped up so quickly,” said Grainne Gilmore, head of research at Zoopla.

“This imbalance between demand and supply has put upward pressure on prices.”

Stamp duty holiday

The government’s temporary stamp duty holiday also motivated many to make their moves, with savings of up to £15,000 for those who beat the deadline.

Initially set to expire on March 31, the incentive was extended to June and partially continued until the end of September. All of which helped sustain the market’s momentum during a time when many had predicted a gradual slowdown.

Record-low interest rates also played a major role in the housing market’s stellar performance over the course of the past year. Still fixed at just 0.25% for the time being, ultra-low Bank of England base rates are making it cheaper for new and existing mortgage payers to finance home purchases.

However, a base rate as low as 0.25% is entirely unsustainable and will not be around forever. Mortgage payers locking in exceptionally low introductory rates are therefore being warned to expect significant increases going forward as the UK economy returns to strength.

A return to urban living?

When working from home became the new norm during the pandemic, millions exited the UK’s biggest cities in search of more spacious and affordable properties elsewhere. Today, major urban centres like London are seeing a slow but steady return as life gradually edges back to normal.

“We’ve already seen the capital start to awaken from its pandemic property market slumber with a return to the office and the growing demand from foreign buyers, all helping to cultivate early signs of house price prosperity,” commented Guy Gittins, chief executive of estate agent Chesterton’s.

Towards the end of 2021, estate agents reported an increase in buyer inquiries for the London area, up to 12% higher than a year earlier.

How this return to urban living affects broader property prices across the UK remains to be seen, but the race for space in quieter corners of the country is predicted to continue for some time.

Average UK Property Price Ends Year at Record £254,822

2021 closed out with the average UK property price at a new all-time high of £254,822. According to the latest figures released by the Nationwide Building Society, average house prices have increased by an astonishing £23,902 over the past 12 months.

The average UK house price rose by nearly £24,000 during 2021, the biggest increase ever recorded in a single year in cash terms, according to an index.

“The price of a typical UK home is now at a record high of £254,822, up £23,902 over the year, the largest rise we’ve seen in a single year in cash terms,” commented the bank’s chief economist, Robert Gardner.

“Prices are now 16% higher than before the pandemic struck in early 2020.”

While the withdrawal of the temporary stamp duty holiday had been expected to trigger a gradual slowdown, the sector’s stellar performance continued right through to the end of the year.

“Mortgage approvals for house purchases have continued to run above pre-pandemic levels, despite the surge in activity seen earlier in the year. Indeed, in the first 11 months of 2021, the total number of property transactions was almost 30% higher than over the same period of 2019,” Mr. Gardner said.

“At the same time, the stock of homes on the market has remained extremely low throughout the year, which has contributed to the robust pace of price growth.”

An inevitable slowdown in 2022

The combination of numerous economic and political factors will lead to a gradual yet inevitable slowdown for the sector in 2022, analysts predict. Though property prices are set to continue hovering around all-time highs, monthly house price growth is expected to slow throughout 2022.

Speaking on behalf of wealth management firm Quilter, mortgage expert Karen Noye warned that a gradual slowdown in house price growth may not make the market more accessible for first-time buyers.

“As we move into 2022, and away from the whirlwind property market seen throughout 2021—we are likely to see a slowdown in property prices and transactions, particularly if the Bank of England further increases interest rates,” she said.

“While we may see the property market slow, this does not mean buying a home will become instantly more affordable. Alongside the already inflated housing market, mortgage rates have increased following the Bank of England’s rate rise, and as inflation does not appear to be slowing, costs will likely continue to rise.”

“Increased mortgage costs coupled with the uncertainty surrounding the Omicron variant could well make people think twice about moving home, and we could see a break in house price growth as a result. However, supply versus demand issues persist, so we are likely to see a gradual slowing of growth as we head into 2022 as opposed to a sharp drop.”

Impressive end-of-year performance

The sector’s performance during what would traditionally be a fairly quiet time of the year suggests demand will continue to outstrip available supply for some time to come.

“Although the last month of the year tends to be quieter for the market as people wind down for Christmas, there was still plenty of interest in buying homes, and more demand than supply pushed house prices up further still,” commented Mark Harris, chief executive of mortgage broker SPF Private Clients.

His sentiments were echoed by the commercial director of property lender MT Finance, Gareth Lewis, who suggested the wave of post-lockdown demand unleashed on the market is helping sustain its momentum.

“Although many people have made their move, there is still plenty of pent-up demand, which will keep property prices high,” he said.

A Brief Look at the Buy-to-Let Landscape Right Now

Buy-to-let was popular in the UK long before the concept was formally introduced, almost exactly 25 years ago. For investors, the appeal of an attractive buy-to-let investment is obvious.

Along with providing regular income through rental payments, capital gains through house price increases are also on the cards.

It comes as no surprise to learn that interest in buy-to-let investments remains consistently high across the UK.

30 years ago, average UK house prices were somewhere around the £60,000 mark. Today, the figure has exceeded £250,000. Homeownership is simply impossible for many, or not the preferred option for others.

As a result, the UK’s private rental sector continues to go from strength to strength, with investors reaping the benefits of record-high demand.

Flexibility and compassion

The unfortunate events of the past 18 months have cast further light on the attitude and approach of today’s buy-to-let landlords. For example, research suggests that during the course of the pandemic, around two-thirds of private landlords in the UK demonstrated flexibility with tenants’ payments, who were struggling financially as a result of the crisis.

Furthermore, around 80% said that they would be happy to accept a lower monthly rent payment in return for reliable long-term tenants. Only 55% indicated their intent to increase monthly rents over the course of the next year, suggesting that almost half will not be putting their prices up.

In terms of portfolio expansion, almost 40% of investors said they had purchased another buy-to-let property between July 2020 and September this year. Interestingly, almost one third said that they had attempted to expand their portfolio, but were unsuccessful in doing so.

Issues with qualifying for loans with conventional high-street banks were cited as one of the main reasons for failed investments, with many having turned to flexible bridging loans to expand their property portfolios.

An attractive and profitable venture

Perhaps most importantly, around 70% of landlords believe that buy-to-let investments are still an attractive and potentially profitable option. This is particularly relevant when considering the UK’s skyrocketing average house price, making it more expensive than ever for investors to buy homes.

In addition, the UK government continues to make life difficult and expensive for private landlords, who have been hit by a raft of taxation and regulation adjustments over recent years. One of which was the additional stamp duty levy of 3% introduced in 2016, followed shortly by a significant mortgage interest tax relief reduction.

Still, nothing seems to have quelled the appetite of investors, who continue to see BTL as a comparatively safe haven. With available inventory and affordable housing having all but dried up across the country, the private rental sector will continue to play a pivotal role in the UK’s wider housing market indefinitely.

No Signs of a Housing Market Crash on the Horizon

According to the latest figures from Nationwide, house price growth may be slowly beginning to decelerate. But what has become clear is that the withdrawal of the government’s temporary stamp duty incentive has not led to the housing market crash many had predicted.

In fact, there are no signs of anything close to a cliff-edge situation on the horizon, nor are there likely to be any as we head into the New Year.

Analysts have been in no doubt that the meteoric monthly growth in house prices recorded throughout 2021 could not hold its momentum indefinitely. Average house prices are still hovering around all-time highs in most regions, and annual house price growth for September still came out at 10%.

This represented a slight decline from the 11% year-on-year growth recorded in August. Compared to the beginning of last year, average house prices across the UK are up around 13% overall.

A combination of pent-up demand being released on the market and the temporary Stamp Duty holiday fuelled explosive property price growth during the first few months of the year. The consensus therefore suggested a crash was inevitable as demand began to slow and the Stamp Duty holiday expired.

In reality, prospective buyers are still competing frantically for desirable properties in popular parts of the country. In addition, the gradual return to city centre living and working is having an impact on the prices of properties that were not particularly popular during the pandemic.

Low-interest rates and a lack of inventory

Another factor that continues to fuel the market’s consistent performance is the availability of exceptionally affordable mortgages.

Recent months have seen a slew of 95% LTV products return to the market for the first time since the beginning of the pandemic. With deposit requirements being one of the biggest obstacles for first-time buyers looking to get on the housing ladder, 95% of LTV mortgages have understandably proved popular, at least among those in a strong enough financial position to qualify for them.

The combination of low-interest rates and a lack of available inventory across much of the country is likely to continue driving competition among prospective buyers over the coming months. As there is already insufficient supply available to meet demand, competition for available properties is only likely to escalate as we move into the new year.

The governor of the Bank of England has stated clearly that interest rates will have to be increased at some point next year in order to curb inflation. But even then, available inventory will not be nearly sufficient to cope with demand.

The likelihood of anything close to a housing market crash or a sudden plummet in house prices is more or less zero.