Should You Renew Your Mortgage or Wait?
The Bank of England has held the base rate at 5.25% for the second time in a row – have we hit the peak?
In our last show of the year, we speak to mortgage expert Susan Whitley-Park. It’s been a tumultuous year in the UK economy, which has a had a huge impact on the UK housing industry:
- Landlords are leaving the sector, putting pressure on rental supply
- The pressure on rental supply is driving up rents, as tenants compete for fewer homes
- Mortgage rates are on the increase, so new BTL mortgages and remortgages are much steeper than before
- Rent arrears are also on the rise as salaries are not increasing in line with rents
So what does this mean as we look towards 2024? Susan walks you through everything you need to know about inflation, base rates and their impact on mortgages, to give you a conclusive mortgage wrap up to 2023.
Latest Landlord News
We also take a look at the latest headlines in the landlord world, including an update on the slashing of ground rents, whether more landlords are selling up and eviction times.
Could Ground Rent Soon Be Slashed for All Leaseholds?
Among the bills proposed in the recent King’s Speech in parliament is a Leasehold and Freehold Reform Bill. Housing Secretary Michael Gove wants to reform ground rents for leaseholders – which currently mean they are obliged to pay the Freeholder an annual fee for the land on which the property is built.
Mr Gove called this:
an annual reminder that you do not own the land your home stands on, that your lease on it is finite, and that there is a payment for the privilege of staying there. Today we are taking further steps to right that wrong […] so leaseholders are not exploited any longer and can take back control of their own destiny.
Its something that mostly affects landlords who own flats or apartments in a larger building – although some individual houses are sold leasehold – but at the moment it can mean being subject to clauses in contracts that can result in spiralling payments for leaseholders, and as the term on the lease shortens, real problems when you come to sell.
If it becomes law, the Leasehold and Freehold Reform Bill would simplify the existing system, and give more security to leaseholders – great news for landlords.
Options include:
- Capping ground rents at a peppercorn rate for current leaseholders – effectively nothing
- Freezing ground rents at current rates
- Capping ground rents at a percentage of the property value
There are also proposals to put a cap on the maximum financial value which ground rents could never exceed, while also limiting ground rent in existing leases to the original amount when the lease was granted
The Leasehold Reform Act of 2022 already means that if any ground rent is demanded as part of a NEW residential long lease, it cannot be charged at more than the cost of one peppercorn per year. The Leasehold and Freehold Bill is set to be introduced to Parliament shortly, with a public consultation open for six weeks.
Landlords Selling Up
New research from agents Hamptons shows that by the end of 2023, landlords will have sold 294,300 more homes than they’ve bought since 2016 – a huge change in the UK housing market, which is one of the key factors in the huge jump in the cost of rents for tenants in recent years.
The Hamptons October Lettings Index shows that investors are set to sell 139,820 buy-to-let properties across the UK this year alone. But – things are starting to change a little – where landlords made up 15.7% of all sellers in 2022, this year is dropped to 14%.
Aneisha Beveridge, Head of Research at Hamptons, says:
Portfolio investors – who tend to be more highly leveraged – are juggling their assets by selling one or two properties to reduce their mortgage debt on the rest of their portfolio, rather than selling up entirely.
It all means there are currently far fewer properties available for rent than there were 5 years ago. But Aneisha Beveridge points out that the supply issue hasn’t ONLY been caused by landlords selling up – but also because: “there’s been little appetite among investors to purchase new buy-to-lets over the last few years. This has reduced the number of homes available to rent which is fuelling rental growth. After adding wider inflationary pressures on top, we think rents will have risen by 25% by the end of 2026.”
While that may prove to be a struggle for people renting properties – for landlords who play the long game and hold on to their portfolio, there remains the opportunity to make a decent return.
Evictions Taking Over 6 Months
The Ministry of Justice has revealed that the average time to process a legitimate eviction is now 29 weeks – a little over 6 months – which is higher than the legal guidelines.
The news comes after the government announced a pause in scrapping Section 21 no fault evictions – until the courts were in order and able to handle Section 8 evictions. The eviction process is among the most emotionally and financially draining impacts on landlords – especially if the tenant is being evicted because of rent arrears, property damage or anti social behaviour.
One of the key issues, recently highlighted by Landlord Action, is the current difficulty of finding a court-appointed bailiff to undertake an eviction. Part of the problem there is over a series of strikes by bailiffs relating to the availability of personal safety equipment
Recruiting and retaining more bailiffs is another of the goals set by the government before Section 21 can be scrapped.
Given the scale of changes needed to bring the courts system back up to speed, its far from clear how long it will be before the government can realistically bring in the changes to Section 21 pledged in the renters Reform Bill – but its likely to be many months, possibly years in the future.
