Summer Budget 2015 – Landlords Reactions

http://www.independent.co.uk/money/spend-save/interest-rates-forget-about-a-rise-were-only-halfway-through-the-crisis-a6677921.html

May be of some comfort to some, but I honestly believe that we are at the start of a generation of very low interest rates, and I can not see base rate above 2% for decades. Think Japan - zero interest rates for 25 years now due to finance crisis caused by an asset bubble and too much debt.

Even if interest rates do increase, an increase can only mean that the economy is doing very well which in turn will mean higher house prices and rental values. If people are earning more money and they are chasing something with limited supply (housing) then that will force prices up.

Reply to the comment left by "Jon Pipllman" at "04/10/2015 - 19:21":

Yes Jon, many encumbered and non incorporated LLs who do not know about Clause 24 are going to get a very nasty surprise in the future at some point.

Similarly a much larger number of LLs (including unencumbered and poss even some incorporated) who also may not know about Clause 24 are going to get a very pleasant surprise in the future at some point.

Reply to the comment left by "Mark Shine" at "04/10/2015 - 20:43":

>Mark S

Very true.

Even though I know, so don't strictly fall into either of your two groups, I am - as a low leveraged LL that hasn't been able to justify a purchase (on yield) for some years - optimistic that I will find a deal or two as a result of some of the former group finding out...

Reply to the comment left by "Jon Pipllman" at "04/10/2015 - 19:21":

I have written to Mydeposits.co.uk and others and I included it in my submission to the Public Bills Committee....

TENANT TAX MUST NOT BE A STEALTH TAX - THERE IS WAY TOO MUCH AT STAKE.

There is a clear responsibility for it to be headline news and proactively pushed to BTL mortgagees. Every lender and every deposit protector should be made to write specifically to every mortgagee, every landlord and every named tenant to make sure there are aware of the Tenant Tax. They should be advise it will affect them and so they must seek urgent proper accounting advice. Landlords should also be encouraged to engage with the NLA or RLA (or whoever a lender would be comfortable to refer a landlord or mortgagee to.)

I believe most don't know what it is all about and someone made a good observation a few pages back, about exactly the same issue - People just don't know about it. I think the post was from a property guru or some such and said something like...

The language of Restriction of Finance Costs Relief to the wealthiest landlords" is fantastic for making sure no one cares about what it actually is.

WE need to shout "TENANT TAX" as even if considered spin it is the antidote to government spin and consealment. So far GO and DG are winning at the information propaganda.

Reply to the comment left by "Mark Brown" at "03/10/2015 - 23:46":

You say I gloat a little.

You say
"Adam Prospect likes to gloat a little and suggest a higher level of intelligence and a considered political and economic motive by the Government. But I genuinely believe it is just utter incompetence."

I have explained my model involving renovations, sales and repayment mortgages to manage the overall scale and also leverage and debt costs.

To my mind I never wanted 50 properties because that meant 50 tenants, 50 boilers, 50 TVs aerials, 50 gas certificates, 50 CO2 detectors, 50 repairs, 50 washing machines, 50 ovens - it just never worked out. My little portfolio pays more than most people earn from 40 hours working - so that always was the plan. A generously modest income but nothing spectacular.

So I have empathy for those who are feeling trapped. I currently hold a development which is leveraged and I intended to keep it....but I won't. So this tax change -- regardless of whether it goes through as is or not - has impacted on my plans.

My suggestion has only ever been to moderate the tone, remember tenants are our life line as we are theirs, assume the government is not just stupid and consider what may also be on the way.

But I think you are right - the government are just incompetent - I think that approach of underestimating those on the other side of the argument and treating them with contempt can't do any harm can it? Other than being under prepared and under researched.

There is another factor that as far as I'm aware hasn't, remarkably, been mentioned yet to my knowledge. This factor could force many LLs with encumbered properties to HAVE to sell.

The factor will be the potential difficulty in getting remortgaged; as it is likely that Lenders will raise substantially the required rental coverage. So if your mortgage is coming to term, or you are having to remortgage because of high (uneconomic) reversionary rates your new Lender may not lend you enough to pay off the old mortgage, so the LL will have to find the difference or sell up. OR raise rents to ensure adequate rental coverage.

I would guess Lenders will be looking for an extra 20-30% coverage, this is another reason to start increasing rents now.

On and the coverage will be based on an interest rate of 6-7%.

I'd be interested in the views of any mortgage brokers on this?

Reply to the comment left by "Barry Fitzpatrick" at "04/10/2015 - 23:05":

Hi Barry.
I think mortgage lenders shouldn't grant any BTL mortgages now - as landlords are open to potentially infinite tax rates - so the mortgage lenders would be taking a ridiculous, unknown risk as well. BTL mortgages are defunct now. Only people not in the know are taking them out and I'm astonished the mortgage lenders haven't been up in arms about it and also stopped lending as these are really risky loans now (which they weren't before the outrageous move that turned them into liabilities, rather than just run-of-the-mill business loans, in effect).
I've got one mortgage coming to term in 2017, which I can pay off from savings and then a bunch of them coming out in 2021, so I will probably have to sell those houses, if this thing isn't reversed by then - which of course, I assume it will be, as it is MENTAL.

Reply to the comment left by "adam prospect" at "04/10/2015 - 22:38":

Adam. The problem for me is I have given my government too much credit. I have always been a respectful citizen, wanting to believe that whichever party is in government they were truly doing what they honestly thought was right. My respect for authority and Government was not conditional of agreeing with what they were doing - of course I often disagreed. I had however just assumed a level of consultation & thought and ability and competence - I was wrong, that clearly doesn't exist. I am mad with me not them...

You are clearly a very smart man and but even you have not been able to articulate with logic why the measure has been introduced when it has and in the way it has. You can see the difficulties even if you don't agree they exist. You'll know the solution is rent increases, even if you want to disagree with them too. And even if you despise us highly geared landlords, which I am sure you don't, even you can see that there is enough harm and misery in the Tenant Tax for everybody to get a good bit.

As the saying goes.. "If Tenant Tax, as proposed, is the answer, It must have been a really really F'd up question." There is no reasonable, reasoned, intelligent competent, genuine, considered objective that has to going down this Tenant Tax path to arrive it's destination. Its akin to going to Mars via the Sun - Even if the objective is desirable or, as you suggest essential, the route is deadly and plain wrong for all.

@Ros

I've two mortgages coming to term in 2018, my current coverage is 138% so I'm not too far off.

Releasing some equity is probably out of the question though!