Entering the new year during a lockdown and remaining to self-isolate reminds us that the grim reality we are facing is not going to go away anytime soon. It is also a reminder that the end of the stamp duty deadline on 31st March is creeping up close, now that it doesn’t feel too long ago when it was introduced.
According to the AMI (Association of Mortgage Intermediaries) and IMLA (Intermediary Lenders Association), they have said “it is now likely that many cases will not complete before 31 March.” The total number of mortgage applications have increased for a second consecutive month for residential mortgages and have also risen at the fastest rate for six years over the past month. Total availability of mortgage products is at the highest since June at 2,782 in December, although there are still 2184 fewer products available now than in December 2019.
There have been a slow increase and re-introduction of the high loan to value tiers for 85% and 90% but nothing for 95% or higher. Clydesdale Bank, Yorkshire Bank and Leeds Building Society have all introduced new details at this 85% LTV in the month of December.
The following are some of the rate changes that have happened from mid-December 2020 to mid-January 2021.
On Thursday 21st January Leeds BS have launched a fee free 90% LTV residential mortgage product and Nationwide have allowed their 90% LTV products to be on a maximum term of 40 years where previously it was shorter. They continue to not lend on New Build properties or flats/maisonettes for loan-to-values greater than 85% , limiting the maximum loan amount to £500,000.
On 19th January, Metro Bank have reduced their 90% LTV residential rates starting from 3.59%. However they will not be accepting any applicants who have been furloughed at any period, or have taken advantage of any SEISS grants in the last 6 months for those wishing to borrow more than 80% LTV.
They also stressed that product transfers are no longer a simple rate switch, but will be assessed and submitted like a brand new application for any existing customers who wish to stay with them.
In October 2020 Accord had reduced their loan-to-income caps to 4.49 for all incomes, however as of Wednesday 20 January, they have increased it to 5 times income where household income is £60,000 and above. Those earning less will remain at 4.49 which was always their policy even pre-Covid.
On the other hand, Scottish Widows Bank have extended their maximum loan-to-income cap of x 4.49 from those earning £25,000 to also include those earning less than £30,000. Self employed applicants will also be subject to a 4.49x Loan-to-income cap temporarily regardless of level of income. Although one of the reasons was to ensure they continued to lend responsibly to lower income earners, it was also to manage their current service levels.
This month, TSB have removed selected 2 year fixed rates completely between 60%-90% LTV for both first time buyer’s and standard house purchase, as well as all their 2 year fixed remortgages between 60%-85% LTV.
They still have 5 year fixed rates for lending between 85%-90% which they reduced the rate on by 0.1% for those particular 5 year fixes that only have a 3 year early redemption charge period, but increased the other 5 year fixed rates by 0.15% where an early redemption charge period remained throughout the first 5 years. This included the loan-to-value bracket for borrowing 60% to 90% LTV.
Buy-to-let lender BM Solutions have re-introduced back their 2 and 5 year fixed rates for 60% and 75% LTV where there was a £1995 fixed product fee. They have also reduced their 5 year fixed rate for 60% and 75% LTV where they had a £995 fee product or no fee product.
Foundation Home Loans have reduced their buy-to-let products between 0.05% to 0.2% across their ranges including for HMO and those products for customers that have impaired credit history.
They have also re-introduced their flat fee £1495 buy-to-let products for their core range.
On a positive note, more lenders including Nationwide, The Mortgage Works and Platform have been able to reduce their service levels where previously it had taken them approximately 30 working days before being able to do the first underwrite on a submitted application.
Specialist buy-to-let lenders such as Foundation Homeloans and Kensington are still currently on average on a 2 week turnaround time before being able to do the first assessment.
On a separate note, we thought it useful to remind a few key dates in 2021 relevant to Landlords.
· Stamp Duty Land Tax Holidaying ending 31st March 2021.
· Eviction Notice Periods revert back to 2 months from 31st March 2021.
· Eviction Ban ends in England on 31st March 2021.
· Electrical Safety checks will become mandatory on 1st April 2021 for every buy-to-let property owned. The “Electrical Safety Compliance Certificate” proves that fixed electrical installations have been safety tested by a qualified electrician, ensuring the safety of tenants residing in the property. Anyone without a certificate after 1st April will be breaking the law.
· Second reading of Dogs and Domestic Animals (Accommodation and Protection) Bill on 29th January 2021 – if this passes which was put forward by Conservative MP Andrew Rosindell, it would allow tenants to have a pet without their landlord’s approval (as long as renters can prove they are responsible owners).
· Online tax return deadline 31st January 2021
· Changes to Right To Rent – 30th June Review. At the moment all landlords much check all tenants’ immigration status irrespective of ethnicity or nationality. As Brexit has brought forward a points-based system into the new year, landlords have been told to keep using passports and National ID cards until 30th June. It is still yet to be confirmed what will happen after that.
· A new law was passed on 8th January 2021 that would come into effect in February 2022 for all Scottish homes including rented property must have a smoke alarm in living rooms, hallways and landings, heat alarms in kitchens and carbon monoxide alarms near boilers or wood burners. This comes as a result of the consequences of the Grenfell Fire. It was originally going to come into effect this year, but Parliament had agreed to postpone it until next February.
There are several other reviews that are planned to take place this year with no fixed date that would be worth keeping tabs on such as:
· The abolition of Section 21, which currently allows landlords to evict tenants with a notice periods of six months after a fixed term tenants ends or during a rolling contract. The abolition would require all evictions to go through the courts.
· Potential increase in Capital Gains Tax. Rishi Sunak hinted that tax increases in 2021 were “inescapable” and although there was no mention of it in the November budget, there has been widespread speculation that it could happen.
· A deadline is due to be set this year for landlords with a turnover of more than £85,000 to be using “MTD (Making Tax Digital.” This would mean landlords would be sending quarterly updates of incomes and expenses via a digital tax account that would work out how much tax is due as it is declared. This means that instead of completing a tax return, a declaration would be signed instead to confirm the numbers are accurate. There is an expected deadline of 2022 for all businesses to sign up, irrespective of turnover.
Please note that all information is valid as of 21st January 2021. Information and observations stated in this article may not be valid for readings afterwards.
MoneyFacts subscription January 2021 edition