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New Eu Mortgage Rules Could Hit House Prices

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Does anyone know about the practicalities and financial implications of setting up a limited (or other type of) company for holding BTL property ?

I have no interest in doing this myself but it occurs to me that if it's easy to do, anyone looking for a mortgage for BTL would just do this. I'm not an expert at all but the only downside I can see is that (I believe) there would be no way of avoiding capital gains tax when selling, as is currently accomplished by claiming a property to be a primary residence .

If this turns out to be a practical way to avoid this EU ruling it seems to me that the only result would be the setting up of large numbers of new companies and landlords would be under no pressure to sell, apart from those desperate to avoid paying CGT.

Anyone know?

There becomes a public record of the entity...means they have to do proper accounts....and its easier to close than a sole trader operation.

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There becomes a public record of the entity...means they have to do proper accounts....and its easier to close than a sole trader operation.

So does that mean then that it would just become a bit less profitable, because landlords would be forced to keep proper records and less able to avoid tax ?

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So does that mean then that it would just become a bit less profitable, because landlords would be forced to keep proper records and less able to avoid tax ?

It would also change the nature of relationship with the bank. With a standard BTL mortgage taken out as an individual, the bank can assume it will be able to put a charge on your primary residence if necessary.

Through a limited company, it becomes a purely commercial transaction, and I would certainly hope the bank would expect a more credible plan than, "House prices double every 7 years, innit."

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It would also change the nature of relationship with the bank. With a standard BTL mortgage taken out as an individual, the bank can assume it will be able to put a charge on your primary residence if necessary.

Through a limited company, it becomes a purely commercial transaction, and I would certainly hope the bank would expect a more credible plan than, "House prices double every 7 years, innit."

I guess that large BTL outfits are probably already set up in this way, Thinking though about the large numbers of small outfits and 'accidental' landlords this change could have quite a significant effect if they were considering this route due to the following:

1. Harder to get a mortgage/mortgage rates higher (unless we get into another boom)

2. More hassle in keeping up with the required paperwork

3. Additional expenses

4. No prospect of a nice CGT free lump sum on selling

Anything else ?

Edited by salamander

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So does that mean then that it would just become a bit less profitable, because landlords would be forced to keep proper records and less able to avoid tax ?

You could collect rents through another 3rd party company.

They could 'not pay you the rents' and then cease trading not submitting accounts.

You could probably do that a couple of times before some realised you were up to no good.

How you'd pay the mortgages I don't know though. (Unless they were wholly owned)

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It would also change the nature of relationship with the bank. With a standard BTL mortgage taken out as an individual, the bank can assume it will be able to put a charge on your primary residence if necessary.

Through a limited company, it becomes a purely commercial transaction, and I would certainly hope the bank would expect a more credible plan than, "House prices double every 7 years, innit."

7 years is pretty ridiculous and carries substantial risk, id imagine the more solid highstreet banks/BS in the uk work on at least 8

Edited by Tamara De Lempicka

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Thinking about it, this would have much wider implications than just BTL because it would create, for the first time, a legislative link between earnings and the size of mortgage that could be given. If enacted this would have to cover all mortgages,not just buy to let.

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Just posted this separately but the Excess is also squealing, happy days!

Surely this can't be true, a front page in the Express on house prices decreasing! That's against the nth law of physics.

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This could be good news for a FTB like myself, but I am skepitcal.

For a start, it's being trailed by the Express and the Telegraph, and its purpose seems more to demonise the EU (as per their usual) than as a serious investigation into the future of UK house prices. And the very assumption that rising house prices ("recovery") is a Good Thing immediately casts doubt on the article's provenance.

One interesting thing that came out of this for me however - the large number of posts in the Telegraph's comments section along the lines of "Much as I hate the EU, this could actually be a step forward, as the Buy-to-Let sector is a menace". That rather surprised, and possibly heartened me.

But while there seems little doubt that the BTL market being decimated would be good for bringing prices in the UK down to more reasonable levels, my skepticism is based on the following:

1) The EU (unlike our own parliamentary system) is generally based aroung compromise and deal-making, rather than diktat. There will be plenty of elbow-room for our government to weasel thru some sort of opt-out.

2) Even if it does get introduced, these wheels grind slowly, and I imagine it would not take full effect for several years yet.

with these two further reinforcing (3) -

3) My belief that there will not actually be a House Price Crash in the UK. While prices still seem unsustainable at present levels, I feel the Government will do whatever it takes to prevent a crash, to avoid the scenario of millions of households plunging into crippling negative equity. Which, in all fairness, is probably a lot worse scenario to find yourself in than having to rent because you can't afford to buy.

I'd predict a gradual decline over the next five years. Except of course in the scenario where the Eurozone economies go tits up, prompting a global financial meltdown. In which case all bets are off.

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A question for any folks on here "in the know"...

Do we have any idea whether an EU decision on this is imminent? Or when it might be due?

I was wondering why both the Express and Telegraph chose to run this story at pretty much the same time in early November - when the final report of the EU study came out in March of this year...

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I was wondering why both the Express and Telegraph chose to run this story at pretty much the same time in early November - when the final report of the EU study came out in March of this year...

From the Telegraph article:-

"Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation."

So it seems that it's already in the process of being implemented.

I saw that BBC interview with Ray Bulger and the previous question was about the EU crisis and what effect it is having on mortgage rates. Bulger pointed out that they were increasing, shock horror by 0.2%! The mindset portrayed by him is that interest rates must never return to normal. What is so worrying for these VIs is that this directive is trying ensure that mortgages are affordable by checking income. They know full well that the cost of housing is simple unaffordable and that without the prop of inflated lending and the wholesale destruction of private equity its game over for their ponzi scheme sooner rather that the later.

Rarely does the MSM ever ask why are rents rising when interest rates are at a historical low and HPI is virtually none existing, and even when they do, the conclusion they draw is that its market economic, too few houses leading to higher prices. Never is the question asked as to what will happen when rates return to more normal levels and tenants are unable to afford the rents that will be needed to maintain a positive yield.

The EU crisis will be blamed when domestic interest rates do rise and that in turn will lead to a collapse in the banking sector. We'll have a HPC but there won't be any funding left for the cash rich to borrow to afford to purchase at the dropping prices. Prices will only stop dropping when property prices match those cash funds. It'll be the mother of all crashes making the previous price corrections seem like minor blips. A huge section of the population will be totally wiped out.

It would be wise if this directive was applied to try to manage a deflation of the property market. If this is kicked into the long grass it'll be a signal that a big HPC is inevitable, it'll just how soon.

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A question for any folks on here "in the know"...

Do we have any idea whether an EU decision on this is imminent? Or when it might be due?

I was wondering why both the Express and Telegraph chose to run this story at pretty much the same time in early November - when the final report of the EU study came out in March of this year...

What is being alluding to is the proposed (as in only being discussed right now) Mortgage Credit Directive, which is to do with responsible lending, balanced and clear marketing of mortgage products, comparable and clear pre-contractual information, sound financial advice, good creditworthiness assessments, and supervision of brokers and other intermediaries.

However, eagle-eyed observers will have noted the date on the document: 31st March this year. So the proposal has been around for seven and a half months before the Express has hit the panic button. Why should this be? Ah well. Someone at the papers has discovered that buy-to-let mortgages could, maybe, no longer be based on projected rental income.

Saying that this would “force hundreds of thousands of people to sell up” is a lie, if they had already secured mortgages on their properties, it would not affect them. So no crash in house prices would be caused, although new mortgages may prove more difficult to secure. But the proposal is still just that – a proposal.

Moreover, the Financial Services Authority (FSA) has, as would be expected, made its own submission, working with the Treasury. The FSA has put at the top of the list of changes it would like to see “the exclusion of ‘niche products’ from the scope of the directive ... such as buy-to-let lending”. And the news coming out of discussions on the proposal suggests that buy-to-let will indeed be exempted.

But none of this is disclosed by the papers why spoil a good story and miss out on the usual frothing pundit from UKIP.

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The proposed legislation looks like a good example of the EU intervening to protect the British people from their own government. There are other examples - human rights , for instance, and meaningful restrictions on the City. No wonder Cameron looks all pink and frowny, and Osborne all pale and sweaty, at summit meetings.

The EU also provides the only meaningful political opposition in this country, since Labour abandoned the job (take your pick when that happened - 5, 10, 20, 30 years ago).

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  • 314 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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