Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Jon Pipllman" at "23/11/2015 - 09:52":

Hello Jon,
Since you and Barry seem to have a good understanding of what Basel III implies, I would be grateful if you could spell it out. All my internet browsing on the subject has come to little apart from that most building societies are already compliant.
Your informed analysis would be of interest to many I am sure.

Alison

There are still plenty of unknowns in terms of how lenders will respond to Basel III but, for BTL, a good place to start is the CML's response to the consultation.

Here are the key points the CML raised and a link to the full document

Buy-to-Let (BTL)

43. We also have concerns how the proposals would affect the BTL market. The paper is ambiguous in the approach of how BTL could be classified. Professional large (organised as a limited cos.) landlords could be classified as specialist lending given the criteria of “income-producing real estate financing” thereby attracting a higher risk weight (120% vs. the current 35%). Alternatively, individual landlords might be classified as ‘other retail’ and attract a 100% risk weight. It would be inconsistent to have different risk weights for essentially similar lending secured on residential properties.

44. Given that BTL lending is secured on residential lending and, therefore, displays many of the default/loss characteristics of that asset class, we consider that BTL lending should be classified as residential lending and attract the same risk weight as this asset class. This is consistent with the conclusions of the Capital Requirements Regulations (CRR).

45. The proposal that covers the change in risk weight for residential property i.e. the use of the two-factor model based on both LTV and DSC would be an inappropriate risk tool for BTL lending. Market practice is to lend at lower LTV levels than residential lending (75-80% LTV) and lenders focus on rental cover of interest payments (Interest Service Cover, ISC) rather than LTI or DSC variables

46. It should be noted that the Bank of England proposes to undertake a consultation in 2015 which will potential provide a macro-prudential overlay to the regulation of BTL mortgages and in particular may include some minimum level of rental cover needed
.
47. We would also draw Basel’s attention to the work undertaken during 2011 to 2013 at EU level in the drafting of Capital Requirements Directive (CRD IV) and the Capital Requirements Regulations (CRR). The issue of the appropriate risk weight for BTL was raised and in conclusion, the weight of evidence meant that BTL lending in the UK maintained its existing 35% risk weight. In our opinion, no new evidence has been presented that would change the conclusions reached in the lengthy CRD/CRR process.

48. If the proposed changes did occur, we estimate that a number of lenders would withdraw from the BTL market and interest rates on BTL mortgages would have to rise.

https://www.cml.org.uk/documents/cml-response-to-basel-committee-on-banking-supervision-s-cp-re/150309-cml-response-to-bis-revisions-to-standardised-risk-weights-v.1.pdf

Hi Everyone,
I have not read this post for a long time so I may be aware of this but its worth repeating.

In the early days Mark was talking about leaving the country as a tax exile. I left the UK 6 years ago and have retired in South Africa on my Royal air Force pension and rental income. I have had rental property for over 20 years and treated it as my pension.
I have 2 property's coming to the end of term after 10 years and have always paid on time etc.
Anyway I no longer qualify for a buy to let mortgage because I live in South Africa. Despite completing my tax returns in the UK as I am now regarded as none resident. So if you are thinking of leaving the country get your BTL sorted until you want to sell. Or at least consider the country to go to and still qualify for the BTL. Its not all bad news I do get to save CGT when I am forced to sell.

History shows that after every war the tax burden is put on the land owners or those the government perceive to have money. It happened after WW1 and WW2 and again now. Its just that most of the public are not aware we have been at war from 2001 to 2014 in Afghanistan.

Reply to the comment left by "Jon Pipllman" at "23/11/2015 - 14:07":

Many thanks Jon. That's very interesting. I wonder if some of the recent policy changes are in anticipation of that. Everything points to high leveraging as being a target.
It would not surprise me if CGT rules were changed soon to become payable on re-mortgaging.

Reply to the comment left by "Alison King" at "23/11/2015 - 14:40":

Now there's a thought. [cgt on refinancing]
But if they want money, why don't they tax foreign buyers and eliminate all borrowing relief for corporate landlords as well. If foreign buyers own 10% of housing stock [or was that 10% or rental stock], that mus be an easy target. Or do too many City friends make a margin on those deals?

And a turnover tax on foreign companies that pay derisory corporation tax.

Reply to the comment left by "Alison King" at "23/11/2015 - 14:40":

Hi Alison,
Please don't even think about that. I'm sure if that was imposed it would have catastrophic affect on the PRS, especially in London and the SE.
I've heard all sorts of rumours about the GO statement on Wednesday. But this is the first time CGT repayment on re-mortgaging has been suggested.

Reply to the comment left by "Alison King" at "23/11/2015 - 14:40":

Alison, with the greatest respect, please do not come out with fresh ideas as members of treasury as well as Housepricecrash.com do snoop in on websites such as property118.

Trust me if they get sniff of this, they will do, what you are saying. So it is best not to play devil's advocates.

Saeef, with the greatest respect the government has enough advisers and think-tanks to be able to cycle through its options without the help of internet forums. Risk assessment on the other hand entails considering all possibilities, weighting them and making provision.

Reply to the comment left by "Saeef Khan" at "23/11/2015 - 10:43":

There are some ltd company mortgages at 2.99 but arrangement fees quite high.

I expect all the interest relief to be removed in the future.

Reply to the comment left by "Manchester Landlord" at "23/11/2015 - 11:12":

I share your view.
I listened to GO on the Andrew Marr show and yes I think he is looking at the housing benefit again.
I also worry regarding ATED as it would be easy to apply to include buy to let .
I also believe that the remaining MIR will go .
And as labour seem to hate us they will attack us from all directions.