Advisers have been urged to help those landlords who may be receiving letters from lenders about their mortgages, following the recent changes to the HMO licensing requirements which are thought to mean a further 177,000 properties now require a HMO license.
Speaking at yesterday’s FSE Midlands, both David Whittaker (Keystone Property Finance) and Adrian Moloney (OneSavings Bank) highlighted how some landlords were already receiving letters from their buy-to-let lenders regarding properties which may now require a license.
They outlined that the original mortgage would not have been granted on a HMO property and landlords in such a position have received letters which tell them to revert the property back to a single let or pay back the loan.
One FSE Midlands broker delegate said a number of her clients had received letters from “one of the two big ‘mainstream’ buy-to-let lenders” even though they had made no changes to the property and it has been a Government decision to change the licensing requirements.
Both Whittaker and Moloney suggested this was increasingly happening and that advisers would potentially need to find new mortgages for their landlord borrowers in such a position.
Whittaker bemoaned those lenders who were sending such letters, saying: “Landlords are punch-drunk from the regulatory changes of the last few years. This is the law of unintended consequences in full effect and you would expect some common sense from lenders. Lenders should say that, as long as there are no changes to the property or that the landlord doesn’t want a further advance, that they can keep the loan.”
Advisers were also warned that the recent changes meant that buy-to-let was no longer a transactional undertaking. “Advisers have to move to a new place with buy-to-let from transactional to advisory,” said Whittaker.
“Next year on the 23rd January 2019 when landlords file their tax returns, it will be the first year of a four-year wake-up call. This is when they will need you; you have to help your landlords to the other side.”
Both Moloney and Whittaker were not surprised by this week’s Budget which did not introduce any landlord-supporting measures, such as rolling back extra stamp duty charges or a u-turn on the cuts to mortgage interest tax relief.
“Hammond is not called ‘Spreadsheet Phil’ for nothing,” said Whittaker. “He was never going to take them away. The best was that he would damn well leave it alone. Let’s be honest, he didn’t have much room to do anything in our world.”
Prior to the Budget there was a suggestion that landlords might be able to get CGT relief if they sold their properties to long-standing tenants. Both Whittaker and Moloney were not surprised that this didn’t make the Budget. “It was never going to fly,” said Whittaker. “Anything that would line the pockets of landlords is not going to happen. HMRC and the Chancellor see the landlord community as a group that traditionally hasn’t paid its wedge. Landlords do not draw any empathy in the corridors of Whitehall.”
Moloney expressed scepticism that any such policy would work in the first place. “If your investment is good why would you get rid of it?” he asked. “Sales of property investments have not been really picked up in the main by first-time buyers anyway, they’ve been picked up by other landlords.”
Looking ahead to 2019, Moloney was positive about the opportunities for advisers in the buy-to-let space. “Remortgage has been the mainstay of the market for some time and has definitely benefited this year from a roll-off in two-year money,” he said.” Next year is a great year of opportunity because it will begin to bite people in the pocket.”
Whittaker agreed but warned advisers to be aware that an increase in five-year remortgage deals could impact on business levels. “Those who would normally be on two-year deals may now be on five years,” he said. “And so you won’t be having that remortgage conversation for another 36 months, so it’s important that you should look at your business modelling because of this.”