Podcast Summary
Autumn Budget: Stamp Duty Fate Postponed Until After Next Election: The UK Autumn Budget presented no major game-changing announcements, with the fate of stamp duty cuts postponed until after the next general election. Investors can currently enjoy higher stamp duty thresholds.
The autumn budget presented by the UK government, while not as disastrous as the previous mini-budget, has been met with mixed reactions due to increased taxes. The budget, which was delayed due to the change in leadership, seems to be a return to the status quo with no major game-changing announcements. One of the most significant decisions, the fate of stamp duty cuts, has been postponed until after the next general election, which is likely to be held before January 2025. This means that the next government, whether it is Labour or the Conservatives, will make the decision on the future of stamp duty. In the meantime, investors can enjoy the recently introduced higher stamp duty thresholds. The timing of some measures, such as stamp duty, has raised some eyebrows, with speculation that they may be used as political tools to win votes in the upcoming election.
Changes to tax allowances impact property investors: Investors using companies for property face higher taxes due to removed capital gains relief and reduced dividend allowance. Volatile mortgage rates increase costs.
The government is making significant changes to tax allowances that will impact property investors, specifically those using companies, by removing capital gains relief and reducing the dividend allowance. This means investors will pay more tax on profits, making it less advantageous to invest through a limited company. Additionally, mortgage rates have been volatile, increasing gradually throughout the year and peaking after the mini-budget in September, making fixed-rate mortgages more expensive. Overall, these changes will affect property investors' profitability and financial planning.
Mortgage Industry Volatility: Longer-Term Rates Starting to Rebound: Despite market volatility, longer-term fixed rates for property investors are gradually coming down, allowing for more lenient stress tests and higher loan amounts.
The mortgage industry has experienced significant volatility over the last six months due to rising base rates and uncertain economic conditions. This led to lenders withdrawing products or hiking rates, making it difficult for investors to plan. However, there is some positive news as 5-year fixed rates are starting to be rereleased and are gradually coming down again. These longer-term fixed rates are important for property investors as they allow for more lenient stress tests and the ability to secure higher loan amounts, keeping more cash free for future investments. It is expected that most vanilla buy-to-let lenders will follow suit in releasing these products over the next few weeks. Despite the recent challenges, it's important for investors to stay informed and adapt to the changing market conditions.
Considering refinancing? Assess your situation carefully: Individuals should weigh the benefits of refinancing against the costs, considering their current financial situation and future plans. Holding off may be beneficial for some, while others may need to consider a variable rate to reduce costs. Investors should evaluate their strategy before buying and refinancing.
For those who can afford to wait, it might be beneficial to hold off on refinancing mortgages in the current market, as rates are expected to decrease further. However, for those whose existing fixed rates have expired and are now facing significantly higher variable rates, it may be necessary to consider remortgaging with a variable rate that has no early repayment charges. This could provide some relief until rates stabilize, after which a 5-year fix could be pursued. For investors looking to purchase properties, the ability to buy in cash and then refinance later could be a worthwhile strategy, as long as it aligns with their overall investment strategy and does not limit their ability to purchase additional assets. Overall, the advice is to assess individual situations carefully and consider all available options before making a decision.
Alternative options for investors struggling to meet mortgage stress tests: Investors can consider top slicing or switch and fix mortgage products to meet mortgage stress tests. Top slicing involves using income to supplement rental income, while switch and fix offers security and flexibility with no extra charge for switching to a fixed rate later.
For investors who can't afford to buy properties in cash and are struggling to meet mortgage stress tests, there are alternative options like top slicing. This involves using a portion of your income to supplement the rental income to meet the lender's requirements. However, it's essential to consider the higher rates and potential penalties for refinancing in the future. Another option is a switch and fix mortgage product, which allows you to remortgage onto a variable rate now and switch to a fixed rate later with no extra charge. This can provide security and flexibility for investors during uncertain market conditions. It's crucial to consult with a mortgage broker to determine which option is best for your individual circumstances. Currently, some lenders offer competitive rates for both personal and limited company mortgages, and it's worth exploring these options to secure the best deal.
Buy-to-let investors see lower mortgage rates: Despite potential property value drops, refinancing options remain for buy-to-let investors as long as rents cover costs, with specialist lenders offering solutions.
For buy-to-let investors, the market is seeing a reduction in interest rates for new mortgages, with some lenders offering as low as 4.8% for personal names and 5.49% for limited companies. However, refinancing before the end of a fixed rate could be challenging if property values drop and loan-to-value ratios increase. It's essential to consider the specific circumstances, including achievable rents and stress tests, when evaluating refinancing options. The media's focus on potential house price drops has led to concerns about refinancing, but as long as rents are coming in, the value of the property may not significantly impact the investment. However, if the value drops just before the end of a fixed rate, it could affect the ability to refinance on favorable terms. Specialist buy-to-let lenders may offer solutions even if they are slightly higher than what investors are willing to pay, but still less than the standard variable rate they might revert to with their existing lender. The Portfolio app aims to make property investment accessible to more people and offers a new way to feel involved while investing in buy-to-let properties.
Understanding the differences between various types of lenders: Consider working with a mortgage advisor to navigate flexible lending options from tier 4 lenders, but be aware of potentially higher interest rates. Predictions suggest mortgage rates may stabilize soon, but economic uncertainty could cause a short-term dip. Homeowners should carefully weigh their options before refinancing.
There are differences between various types of lenders, specifically those in the tier 4 bracket, which can offer more flexible lending criteria and potentially lower stress tests compared to traditional banks. However, these lenders may charge higher interest rates. Looking ahead, it is predicted that mortgage rates will stabilize towards the end of this year or early next, but there may be a short-term dip in the market due to economic uncertainty. It's important for homeowners to consider their options carefully and potentially hold off on refinancing if they're close to a shortfall. Overall, it's crucial to work with a mortgage advisor to navigate the complexities of the mortgage market and make informed decisions based on individual circumstances.
Borrowing rates increasing to around 5% for limited companies and 4% for personal names: Expect borrowing rates to settle around 5% for limited companies and potentially 4% for personal names, while rental yields continue to rise. Adjust investment strategies with expert advice from a mortgage broker.
Borrowing rates have significantly increased in the current market and are expected to settle around the 5% mark for limited company buy to lets and potentially 4% for buy to lets and personal names. Rental yields are also predicted to continue rising over the next 6 to 12 months. These changes may result in a new normal for investors, requiring them to adjust their expectations and strategies. It's crucial to work with a buy to let mortgage expert to navigate the complexities of the current market. Rob and I strongly recommend using a mortgage broker for buy to let mortgages. For more insights and updates, stay tuned for future episodes featuring industry experts. As a bonus, I encourage you to watch Rob's recent video titled "UK mortgage rates. What should you do?" for additional insights on this topic.
Stay informed about UK mortgage rates with Mister D: Subscribe to Property Hub YouTube channel for mortgage rate insights and expert advice, including unfamiliar topics like swap rates, during times of crisis
If you're interested in staying informed about the current state of UK mortgage rates and gaining insights from industry expert, Mister D, make sure to subscribe to the Property Hub YouTube channel. With a new video, "UK Mortgage Rates: What Should You Do?" now available, and more content coming in January, it's the perfect time to subscribe and turn on notifications. The video covers various topics, including swap rates, which may be unfamiliar to some, but becoming knowledgeable is crucial during times of crisis. Stay informed and join the Property Hub community every Thursday for market updates. In the meantime, find them on social media at @propertyhubuk.
