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landlord-struggling-housing-market

Landlords struggling in changing housing market climate

We achieved an average mortgage  write off of 77% for our clients in 2018.

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Recent research released by the National Landlords Association has revealed that many landlords are struggling to keep their heads above water.

While other research just out reveals they are also confused by new legislation.

The research done by the NLA indicates around 795 of landlords in the UK are finding it impossible to pay more than the interest in their buy to let mortgages.

This is down to the rising costs of being a landlord in the current economic climate.

Recent government tax charges (Section 24) have made it even more difficult for landlords as mortgage interest tax relief is being phased out and will no longer be available by 2021.

But what is Section 24?

It was introduced in April 2017. What it means is that landlords will no longer be able to claim mortgage interest, or any other property finance, as tax deductible.

Instead, rental profit will be taxed with a maximum deduction for finance costs of 20%, the basic tax rate, by 2021.

This has had a negative effect on landlords with large mortgage payments.

The NLA is calling upon the government to give landlords more time to get used to the new changes in place – with some struggling to keep pace.

Some critics believe these tax hikes are driving good landlords out of the market, leaving it wide open to rogue landlords who pay no attention to landlord taxes and increased regulatory control.

They say that making buy to let unaffordable is putting vulnerable tenants at risk and reducing the quantity of affordable rental housing in the UK.

And landlords are also finding it hard to keep up with the changes in legislation and regulation in the UK’s rental market, according to the latest research.

Bridging lender Market Financial Solutions (MFS) surveyed 400 UK landlords who let one or more residential properties and it revealed startling results.

It found that 30% do not understand the changes to Homes in Multiple Occupation (HMO) licensing, which came into effect in October 2018 to stipulate on the minimum sizes of rooms.

Almost one in three (28%) landlords admitted to not fully knowing what the abolition of Section 21 means. The reform, which was implemented in June 2019, aims to prevent unfair tenant evictions.

A similar number (27%) said they do not understand the tenant fees ban (June 2019) or how it may affect them.

MFS’ research uncovered a similar lack of knowledge when it comes to tax reforms that are likely to impact UK landlords. A quarter (25%) said they are not up-to-date with the latest changes to reduce tax relief on buy-to-let mortgage repayments, while even more (28%) do not understand the reforms to inheritance tax with regards to passing down properties.

The survey also showed widespread opposition to the new legislative changes. Over two-fifths (44%) of landlords are against the ban on tenant fees, compared to 23% who are in favour.

The abolition of Section 21 (37% against, 16% for), and the changes to buy-to-let mortgage relief (48% against, 16% for) attracted similar disapproval.

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Paresh Raja, CEO at MFS said: “The legislation and regulation governing the UK’s rental market is constantly evolving, and today’s research clearly shows that landlords are struggling to keep pace with the change.

“From HMO regulations to the abolition of Section 21, these are significant reforms that, for the most part, are rightly designed to protect tenants.

“Nevertheless, there’s evidently frustration among landlords who feel they are being unfairly targeted, particularly when it comes to the stricter taxes being introduced.

“It’s essential that anyone renting out a property — even if they would not consider themselves a landlord — understands all the new reforms and takes action to ensure their properties meet the necessary standards and their finances are structured in line with the new reforms.”

And Tom Cardwell (Director CD Fairfield) believes that Landlord Debt Advisory has the knowledge and expertise to help troubled landlords.

“There are a number of different problems that landlords in distress would come to us with. The three key ones would be mortgage arrears and mainly these clients would have interest only loans of course.

“Secondly is negative equity. And thirdly very short terms on the end of their loans.

“We prefer if a client came to us as quickly as possible if they have an issue. Prevention is better than cure.

“They think that other landlords are not in their position. It is something that they would not talk about openly. And we find when landlords speak to us they get some relief by talking to someone who understands the issues and has assisted 100s of people in similar positions.

“Our process would involve an initial chat with the client on the phone. If we think we can help we’ll then offer them a case review, where we can conduct some detailed research into their specific case and advise them accordingly.

“We will then put together a pack and meet the client again to discuss their options. We will discuss everything from a restructuring through to disposal and settlement, enabling them then to make an informed decision.

 “Landlord Debt Advisory is unique because we are the only company of our type with all of the regulated options under one roof.  

“So regardless of the required outcome of the landlord we are available to provide that advice and service.

“The key to the most favourable outcome is early action. If a landlord has a problem in the immediacy, or it is something they have been struggling with for a length of time, then the early the options are assessed generally the greater the choice.

“There are so many issues affecting landlords in 2019. There are the immediate headaches of Section 24 taxation, PRA lending rule changes, Section 21, rental arrears etc and then the longer term issues like interest only terms ending, interest rates rising and negative equity.

“The main thing is that they address that they take action and speak to a regulated advisor as soon as possible,” said Cardwell.

Speak to us today if you have any questions and to see how Landlord Debt Advisory can help on 0161 222 4311.