london_property_market

It’s Tuesday and you know what that means...  

Rob & Rob are back answering some more listener questions! 

We’ve got some really interesting ones this week so let's dive right in! 

Our first question is all about the London market. 

Our listener is looking to buy his first property in London, and after listening to our recent podcast on the 18-year property cycle (which you can catch up with here) he thinks now may be a good time to buy. 

However, as a long-time listener of the podcast, he knows Rob & Rob have previously mentioned that London is typically overvalued and with the crash being around four years away is now actually a good time to buy? 

Our listener wants to know if London is the exception from the 18-year cycle or does everything they mentioned in their latest podcast still ring true? 

Next up, Chris has got a tough decision to make, and he’d like the guy's advice. 

He’s currently on the search for a larger family home. He owns two properties, and he’s had one of them (a four-bed semi-detached) valued at around 200K, which means he’s got himself a fair bit of equity. 

What he wants to know is should he sell up and use the money to buy his next home or keep the property, rent it out and release some equity to buy his new family home? 

Tune in to find out what advice the guys have got this week! 

Do you have a buy-to-let or property investment related question for Rob & Rob? You could feature on the next episode by giving us a call on 013 808 00035 and leaving a message with your name and question (normal UK call rates apply).  

Or if you prefer, click here to leave a recording via your computer instead. 

The next question on Ask Rob & Rob could be yours.  

Have you joined us over on the Property Hub Forum yet? Our online community is friendly, informative, and the members are waiting to welcome you with open arms. So, get yourself over and introduce yourself. 

And if you’d like to find out more information about Portfolio you can do that here. 

See omnystudio.com/listener for privacy information.

It's Meetup night tonight, and we're hoping lots of you are headed to our free and friendly gatherings all across the UK and beyond. If you haven't yet booked your ticket you can find your nearest location here. Rob B is heading to the coast, and will be in Bournemouth saying hi to some local Hubbers there.

Now, on to this week's episode which is all about a shake up in the mortgage market that may have just slipped under the radar. Now, some of you won't be affected by this at all but some of you really will so you wont want to miss the details.

So, the Bank Of England has an arm called the Prudential Regulation Authority (PRA) that regulates lenders. They’ve brought in new rules that lenders must follow, to avoid the risky lending that contributed to the last crash.

This is happening in two parts:

• Tougher rental cover tests, since January 2017
• “Portfolio landlord” underwriting, from September 2017

So what are the rules on rental cover:

• The rent must cover at least 125% of the mortgage payment when the interest rate is at least 5.5% – but many lenders are using 145%
• Rule of thumb - each £100 of monthly rent will support £15,000 of borrowing
  • So £500 rent = £75,000 borrowing. If it costs £100k, you’re fine. More than that, you’ll need a larger deposit = lower ROI
• However this doesn't apply to:
  • - Mortgages for limited companies
  • - Bridging lending
  • - Commercial or semi-commercial property
  • - Holiday lets
  • - Any loans with a fixed term of five years or longer
• Effect: You won’t get as much leverage for lower-yielding properties

 

What about the forthcoming portfolio Landlord underwriting?

• So the definition of “portfolio landlord” is someone with 4 or more mortgaged properties
• Any properties in a Ltd Co also count towards the total
• Every lender can decide what they want to see, but PRA suggests they look at:
  • - Property portfolio spreadsheet
  • - Cashflow forecast spreadsheet
  • - Income and expenditure spreadsheet
  • - Business plan
  • - Three months' bank statements
  • - SA302s and tax overviews from HMRC
  • - Tenancy agreements for all properties
• Basically you need to make a case for the new loan in the context of your entire “rental business”, not just the property you’re buying
• Effect:
  • Slower applications because more for lender to look at
  • More declines, because there’s more they could decide they don’t like
• (Doesn’t apply to Ltd Companies, but they have to do most of this anyway)

So what does all of this mean?

• The rental cover tests means bigger deposits in London and a few other areas, but shouldn’t affect elsewhere
• Portfolio Landlord criteria will make for painful applications, but it’s hard to be annoyed about it because if you were going for a business loan they’d want to see all this stuff - and it is a business
• BUT it’s yet another measure that will deter amateur landlords...which could play into the wobble and mean opportunity for investors who are serious

News story of the week: Research reveals extent of price drops by property agents in London

35% of London properties have had a price reduction since they were first marketed.

Nationally, 77% of properties are selling below asking price.

Wobble time? Maybe so. It certainly looks like a buyers market right now. 

Resource of the week

http://podsync.net/ is a simple and free service that lets you listen to any YouTube or Vimeo channels, playlists or user videos in podcast format.

Join the conversation over in the forum

Will this be something that affects you? Join the conversation in the forum.

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