City Mortgage Solutions Opinion: The Autumn Statement

August Statement
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So, the first Autumn budget from new chancellor Phillip Hammond, which, it also turns out, will be the last, as the government have decided to scrap it going forward. 

What impact, if any, will there be for the home-owner or buy to let landlord? Here’s our thoughts.

Residential

The budget gave no signs of interest rates increases. In fact with higher national borrowings there is more pressure on not upsetting the apple cart. Lenders are currently in a price war with superb 2 year fixed rate mortgages in and around 1% with some 5 year deals at under 2%. The great news now is that many customers are coming off previous fixed rate mortgage deals and are now in a position to enjoy a very healthy reduction on their monthly payments when they remortgage.

Housing demand

Successive governments have failed to address the imbalance between supply and demand in the housing market, which is heavily influenced by lacklustre house building. Plans for a new infrastructure fund to support house building in areas of high demand, in addition to a homebuilders’ fund, are a positive step and show a commitment to overcoming these challenges.

But as is often the case, a handful of Budget or Autumn Statement policies won’t fix one of the biggest domestic challenges facing the UK. The government still needs to prove it genuinely possesses the will to address the fundamental challenges facing the housing market and will not resort to short term populist policies that stoke tensions between housing tenures.

It is simply impossible to deliver on home-ownership ambitions without tangible action to build more homes, rather than attempting to rein in house prices by restricting access to mortgage finance and dampening demand.

Abolishing letting fees

Well the government’s stance to ban letting fees to make it easier for tenants all sounds very well. But these fees usually associated with tenant referencing and inventories will no doubt be passed back to the Landlord. And as we have seen in the past with the taxation changes, they often just force Landlords to recuperate costs by actually putting up rents. Tenant 0 Landlord 1.

From a corporate point of view shares in Foxtons and Countrywide plunged 8.5% & 5.5% respectively amid the news. David Cox, managing director of the Association of Residential Letting Agents (ARLA) comments

Most agents don’t make a profit on tenant fees, meaning the cost will be passed to landlords and back to tenants. A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.

All of the implications need to be taken into account.

If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents.

The banning of fees will end up hurting the most, the very people the government intends on helping the most.

Buy to Let market

In April an extra three per cent stamp duty for second home buyers was introduced. And from 2017 tax perks for small landlords will also be scaled back, with mortgage interest relief on rental properties reduced to the basic rate of income tax only. The Bank of England is also next year set to make it harder for buy-to-let-investors to take out a mortgage.

Now banning tenant letting agent fees could be the final straw for more small landlords.

Insurance Premium Tax ( IPT)

The chancellor said the government will raise Insurance premium tax  from 10% currently, to 12% from next June.”  We think that the impact of measures announced  on residential landlords will be minimal but of course still adds to the woes of the average BTL landlord.

For more details on how the above may affect your situation, feel free to call your City Mortgage Solutions broker or call us here at head office on 020 7481 3736.