71% of accidental landlords unaware of new regulations

71% of accidental landlords unaware of new regulations

More than half (55%) of new buy-to-let mortgage applicants are unaware of the mortgage tax relief changes, with accidental landlords the least likely to be aware of these new regulations, according to landlord insurance provider Direct Line for Business.

Nearly two-thirds (6%) of applicants were unaware of either the changes to mortgage tax relief or MCD.  This lack of awareness rises to 71% amongst ‘accidental landlords’, namely those who rent out property due to unforeseen circumstances such as being unable to sell, or inheriting a home.

Mortgage advisers estimate that accidental landlords account for approximately one in six (17%) new mortgage applications, with overall buy-to-let mortgage applications growing by 29% in the past year.

The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy-to-let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as “consumer” lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests.  
 
Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic-rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy-to-let property will pay a 3% surcharge on their stamp duty bill.


Nick Breton, Head of Direct Line for Business, said:

“The new EU legislation on mortgages coupled with the Government’s increase in buy-to-let taxation could significantly alter the buy-to-let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord.

“With house prices in the UK rising by 7% in the year leading to October 20152, and with the estimated average deposit standing at more than £61,0003, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city.”

With the new legislation set to be phased in between 2017 and 2020, Direct Line for Business is providing landlords looking to protect their income with the following tips:

Get good insurance cover – as well as covering the building and its contents, landlord insurance can also cover the landlord’s liability and loss of rent following an insured event such as a fire or flood. The average rental cost is £739pcm4 so not having the right cover in place could have a significant impact on your finances, especially if the property is uninhabitable for a period of time while repairs are taking place.

Secure tenants for less – letting and management agents currently charge between 10 and 15 per cent of the monthly rent in fees. If you have time and are prepared to take on the responsibility of finding tenants, making sure you are following all the correct procedures and managing your properties yourself, you could save more than £1,000 per year. If you rent a property privately you can also claim back the cost of advertising, credit checking, referencing, deposit protection and professional inventory costs

Make the most of existing tax benefits – Any money spent on keeping a property in a good state of repair is tax deductible, as are all broker and arrangement fees. You can also claim the whole cost of council tax or utility bills that a tenant would pay

Keep up to date with legislation – It is important to continually keep an eye on the policies affecting landlords to ensure that a property complies with the latest legislative changes. It is also important to consider whether a property is not just affordable in the short term but in the medium to longer term as often relief is phased out and additional taxes phased in over a number of years.

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Latest Comments

Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

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richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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