There is plenty for landlords to ponder heading into 2019.
An evolving market
The past couple of years have seen lender competition rise in the buy to let market.
This has helped to drive buy to let mortgage interest rates down and led to an influx of products with cash back incentives, free valuations, free legal services and a variety of competitive fees.
Incentives and rates in isolation, might seem enticing, but do not give the full picture. Every aspect of the deal, including criteria, must be taken into account when assessing the suitability and total cost of a mortgage.
As a result of this heightened competition, the buy to let market has become more complex.
In May 2018, financial data provider, Moneyfacts, reported that for the first time, the buy to let market offered over 2,000 products for landlords.
With such an array of choice – not to mention the time it takes to research the market and work out the pros and cons of each product, the demand for practical advice and support from a specialist buy to let broker has arguably never been greater.
I expect to see a continued trend of creative product options from lenders, but the days of rock bottom buy to let mortgage interest rates, may be numbered.
The past three years has seen buy to let mortgage rates drop and hover around historically low levels.
This has partly been down to the Bank of England base rate level, which increased in November 2017, for the first time in a decade – and at the time of writing, remains at 0.75%.
But mortgage lenders are influenced by other factors when setting interest rates – and margins have been tight in recent times.
The number of incentives added on products perhaps underlines that interest rates cannot go any lower, but that lenders are still keen to attract landlord business.
I am expecting us to see buy to let mortgage rates rise in 2019.
When the base rate increased again by 0.25% in August, 2018, some lenders absorbed the extra costs and in some cases, even reduced mortgage interest rates.
I believe that this cannot continue indefinitely, so if you are considering remortgaging, it may benefit you to secure a competitive deal now in case rates do go up.
MEES net widens
In April 2018, new rules were introduced in England and Wales, regarding Minimum Energy Efficiency Standards (MEES).
Landlord rental property had to have an Energy Performance Certificate (EPC) rating of at least E.
Failure to do so meant an existing tenancy could not be renewed and no new lets were allowed.
MEES rules mean that from April 2020, regardless of tenancy status, all rental properties will have to have an EPC rating of at least E.
So 2019 will impact more landlords, in preparation for the 2020 deadline.
On October 1st, 2018, new rules redefined what constitutes a House of Multiple Occupation (HMO) and who needs a licence.
Landlords who run an unlicensed HMO, which should have one, face unlimited fines.
But research suggests many landlords remain unaware of the new HMO rules. They could unwittingly be letting properties illegally.
Arguments continue that the HMO rules are ineffective. That genuine, law-abiding landlords are penalised and funding councils.
The tiny minority of ‘rogue’ landlords, ignore licensing laws or move to areas where they don’t need one.
HMO licensing remains a hot topic and the changes have not resolved all issues. Questions remain over their effectiveness in identifying those unwilling to follow the law.
Healthy and Safety to the fore
The Government recently announced plans to review existing health and safety regulations.
The current regulations have not been reviewed for 12 years.
Local Authorities can penalise landlords over safety issues. These include: fire safety, electrical and gas safety checks, minimum bedroom sizes and the number of people living in a rental property. A review of carbon monoxide alarm laws will form part of the Government study.
Once again though, having the resources to enforce represents a challenge.