Summer Budget 2015 – Landlords Reactions

If the BTL market needs slowing down this can be done without restricting interest relief.For example, they could stop allowing interest only btl mortgages.That would slow the market dramatically and the landlord would have less of a competitive edge over the FTB.

The downside is that there would be less cash available to pay for business expenses and the quality of properties offered would probably drop.

Reply to the comment left by "Bill Morgan" at "19/06/2016 - 17:12":

Hi Bill,

I suspect that if IO mortgages were removed from the market, then I doubt the BTL model would work at all. Certainly not for new purchases in London at current prices.

This is the problem. The "affordability" of IO mortgages has allowed house prices to inflate out of control. In fact the BTL business model in London requires house price inflation to make it worth while, as gross yields are awfully low.

Reply to the comment left by "mark andrews" at "19/06/2016 - 17:18":

Hi Mark,

I agree that stopping IO BTL may make the business model uneconomic to use but its still preferable to restricting interest relief on BTL mortgages.

At least I would know my debt was dropping each year.

Reply to the comment left by "Bill Morgan" at "19/06/2016 - 17:34":

but could you make capital repayment work?

£400k property with 25% deposit. So £300k mortgage:

IO : £560 monthly payment

Capital Repayment : £1300 monthly payment.

I suspect many BTL's wouldn't be able to collect sufficient rent to cover the difference in costs. Maybe if you had one property you could make up the difference yourself, but people with highly leveraged portfolios would be screwed.

And herein lies the problem. Owner occupiers have no choice but to opt for capital repayment. Landlords can access more debt as they only need to cover the interest. Although the % rental cover is increasing from 125% to 145-150%, and may well go further once Basel 3 comes into effect.

Reply to the comment left by "mark andrews" at "19/06/2016 - 16:38":

@ Mark Andrews:

Are you suggesting that buying Build to Rent units is a very positive thing and should be encouraged if the acquirer happens to be a large private and encumbered LL (like Grainger), but not if the acquirer is a small private and encumbered LL?

BTW regarding debt you mention… according to their own website, Grainger’s current LTV is 45.5%.

Reply to the comment left by "mark andrews" at "19/06/2016 - 16:48":

You're not actually a landlord, are you? If you were, your ignorance of the situation and your need to parrot every myth ever sold about the sector wouldn't be quite so obvious.

Reply to the comment left by "James Fraser" at "19/06/2016 - 18:55":

'Mark Andrews' is clearly looking forward to the massively increased rents BTR brings. Triple the student rent average in Cardiff. 20% above market rate in Hertfordshire and Exeter. Many more on the way. How funny that the left now hate private individuals so much that they're championing the cause of huge multi-national conglomerates!

Reply to the comment left by "James Fraser" at "19/06/2016 - 19:05":

Exactly James. I can think of several examples of new BTR developments in London where the rents are at least 25% higher than the existing PRS offerings.
As they say, be careful what you wish for!

So am currently in the process of getting another btl mortgage. My initial plan was to do this in a company. But I was very surprised to see how low interest rates have come on personal btl rates. 1.77% for 60% Ltv. It almost makes the loss of interest rate relief irrelevant!

Oh James,

You'll be fine.

Just increase the rents 'innit.