Mortgage Relief: The ‘Rishi’ Effect
The Rate Honourable Rishi: Lenders loosen up in response to the new PM
But just a few days after Rishi Sunak took the reins as the new Prime Minister, there was talk of a confidence-boosting ‘Rishi Effect’ on the financial sector, including some lenders dropping their rates.
Liz Truss might have left 10 Downing Street, but the fallout of her actions remains. The turmoil caused by her administration’s now-infamous September mini-budget is still with us in the form of a higher Bank of England base rate and soaring mortgage rates.
Why? It could be because he’s seen as quite a sensible figure. For one, he was Chancellor of the Exchequer for over two years – which in recent politics is a long time. Also, his Covid emergency support schemes have made him well-known and popular. His background in finance may also inspire confidence in the sector, and they’re the ones making the decisions on lending and rates.
And, of course, any reductions in the cost of borrowing are good news for anyone with a mortgage. And as well as mortgage rates dropping, some lenders have softened their stress-testing on buy-to-let mortgages, much to landlords’ relief.
So, what else can landlords expect from Sunak and his team?
So far in his premiership, Sunak has said very little about how he intends to tackle the economic challenges the UK is facing. However, when he ran for PM over the summer he set out his vision, which included the following:
- Infrastructure. He wants to make sure communities have the infrastructure needed, like schools, doctors, roads, before new homes are built
- Removing barriers. He’s a fan of removing barriers for smaller builders and encouraging modern methods of construction
- Renters’ Reform. He supported the Renters’ Reform Bill and the A Fairer Private Rented Sector White Paper, as well as Covid eviction bans.
Also worth noting is the fact that the new housing minister Lucy Frazer is herself a landlord. In the past, she has spoken up in favour of giving landlords more power and control over their assets.
Plus, Michael Gove – the newly appointed Secretary of State for Housing – appears very committed to building 300,000 houses a year, which could finally start to address the shortage of decent homes.
Best foot backward?
Could it be that the most helpful thing the government could do for landlords is to backtrack on harmful legislation? That’s certainly the view of Vanessa Warwick, a professional landlord and co-founder of Property Tribes:
In 2015 this very onerous tax regime was introduced by George Osborne, which was called Section 24. It really reduced landlords’ profit margins. Then we’ve had increasing regulation and taxation, and there just doesn’t seem to be an end to it. The cost of being a landlord has increased dramatically.
And there are further troubles on the horizon, Vanessa emphasises: ‘There’s also great concern about being able to regain possession of your property, and even with Section 21, you could have to wait up to a year for a court hearing to get your property back. Landlords’ margins are being eroded left, right and centre. And uncertainty is very bad for landlords.
The world is watching
The next economic statement, out on 17th November, will reveal much more about where the new government’s priorities lie. Clearly, the new PM is not afraid of big interventions, and he may be required to step in again to stop homes and livelihoods from going up in smoke.
However, the budget shortfall, along with rising borrowing costs, means Sunak will have to oversee spending cuts and tax hikes. We’ll certainly be watching Sunak closely as he lays out his plans.
If you’re wondering about your next step with your mortgage, and what the latest political news means for your portfolio, our devoted team of experts is here for you. Why not book a call with us right now?And don’t forget to join our private Facebook community for landlords, where you can ask for sound advice from other landlords and the Mashroom advisers.