Buy-to-let market
In our previous publication, we featured an intriguing interview with Liz Syms. It was titled “Buy-to-Let Interview | Business Plan For Clients Produced by Brokers.”
As we embark on the new year, it’s essential to anticipate the challenges awaiting landlords. The buy-to-let market is constantly evolving due to new regulations and policies. In 2017, brokers navigated many changes, and the momentum doesn’t seem to be slowing down. Currently, there are 15 active government consultations. Each is poised to influence landlord clients in various ways.
Tax Changes and Financial Planning
Adding to the complexity, mortgage interest deductions against tax are undergoing reductions. Soon, landlords can only offset 50% of the total cost, with the remaining 50% applicable at the lower tax rate. This reduction is part of a continuous trend. By 2020, all finance costs can only be deducted at the 20% tax rate.
Navigating this intricate tax landscape will require vigilance and strategic financial planning. Staying informed and adapting to these changes will be crucial as we look ahead. This approach will help landlords maintain financial stability and optimise their investments.
Buy-to-let Market | Upcoming changes in EPC regulations
A significant change is approaching, effective from April 1, 2018, in the buy-to-let market. Leasing a property without an Energy Performance Certificate (EPC) rated at least E will be illegal from this date. Landlords breaching this rule may face a civil penalty of up to £4,000. This rule affects all new leases, fresh tenancy agreements, and extensions of existing ones.
Therefore, landlords must promptly address their properties’ energy performance and insulation standards. Taking proactive measures is crucial to ensuring compliance with the minimum EPC standards.
The situation is more complex for landlords renting flats or bedsits within a partially owned building. Flats need individual EPCs, whereas bedsites require an EPC for the entire building.
Although lenders have not officially required EPCs for buy-to-let mortgage applications, this may change. Buildings without a valid EPC might face void periods, impacting landlords’ ability to meet mortgage obligations.
Lenders, especially those handling portfolio landlord applications, might need to consider these factors. An EPC remains valid for ten years. Landlords with a certificate from 2016 did not need a new one immediately. However, if the EPC shows an F or G rating and the property is due for re-letting, landlords must make necessary improvements and obtain a new EPC.
This dynamic landscape in the buy-to-let market requires landlords to stay ahead of regulatory changes and potential lender requirements. Keeping up with these changes will be crucial for landlords to maintain financial stability and optimise their investments.
Buy-to-let market | Communication with clients
With various changes imminent, your clients might not be aware of the necessary steps. They may miss crucial updates unless they actively manage their property. This is an ideal moment for brokers to reach out early in the year. By providing insights into upcoming changes, you can offer valuable preparation guidance.
Seizing this opportunity establishes you as a reliable adviser. It ensures you stay at the forefront of clients’ minds. They will remember you when they contemplate refinancing or starting new buy-to-let ventures.
Staying ahead is crucial in this era of evolving regulations and market dynamics. By initiating these conversations, you position yourself as proactive and knowledgeable, which shows your commitment to clients’ financial endeavours.
This proactive outreach builds a strong client-broker relationship. It fosters trust and loyalty. As the year unfolds, your clients will value your foresight and guidance. This enhances the likelihood of continued collaboration and business growth.
Thank you for reading our publication “Buy-to-let Market | More Change Ahead | 2018.” Stay “Connect“-ed for more updates soon!
