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Tougher rules for buy-to-let landlords


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Tougher rules for buy-to-let landlords

Well, well, well...

https://www.thetimes.co.uk/article/tougher-rules-for-buy-to-let-landlords-ddx9kvcxq

"Barclays is to stop giving mortgages to buy-to-let landlords who buy property through their own limited company.

From June 26 it will also no longer offer mortgages to private landlords looking to buy properties with more than one unit and to limited-liability partnerships (companies set up by at least two people) as well as limited companies that can be registered to only one person. The bank said that it sold very few of these mortgages.

Aaron Strutt at Trinity Financial Group, a mortgage broker, said: “Lenders are wondering how they can leave themselves less exposed to the economic fallout from the pandemic.”

Buying a property through a limited company has become increasingly popular with investors because you can claim relief on your mortgage interest...."

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It may be that the banks find it harder to deal with LTD insolvencies, I know there are more legal costs for the bank in this situation.  I wonder if they also are finding the bounce back loans are part of it.  Good for the cash buyers out there but you’d have to be brave to taken on a BTL in the current climate.  Once Furlough ends it’s going to be a bad time.  

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40 minutes ago, satsuma said:

Once Furlough ends it’s going to be a bad time.  

I do believe this too, however it’s such a known and visible cliff edge which everyone expects to flatten house prices, that part of me wonders if withdrawal of furlough will be as impactful as we all anticipate. 

I’m hopeful but at the same time fearful it doesn’t live up to expectations. I’ve been hurt in the past. 

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1 hour ago, sammersmith said:

I do believe this too, however it’s such a known and visible cliff edge which everyone expects to flatten house prices, that part of me wonders if withdrawal of furlough will be as impactful as we all anticipate. 

I’m hopeful but at the same time fearful it doesn’t live up to expectations. I’ve been hurt in the past. 

Its hard to say - many on furlough are treating this like an extended holiday.  On top of that "COVID fatigue" has set in, hard.  So even if they do return to work, we may end up in a situation like Germany within days.

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25 minutes ago, blackhole said:

we may end up in a situation like Germany within days.

What's that?

In ways, I don't think the market can crash while lots of people believe that it will, ironically.

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2 hours ago, satsuma said:

It may be that the banks find it harder to deal with LTD insolvencies, I know there are more legal costs for the bank in this situation.

Limited Company but the directors have to give a Personal Guarantee. So there is no question of using the Limited liability to get away from an outstanding debt.

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7 minutes ago, Locke said:

In ways, I don't think the market can crash while lots of people believe that it will, ironically.

This is exactly my fear. 

Even after all the negative talk of a crash to property prices, there are still people desperate to dive into property among my own circles as well has billy big balls LLs using bouceback loans to buy more BTLs.

I hope we look back on this period as the peak of stupidity and not the calm before lift off.   

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49 minutes ago, Locke said:

What's that?

In ways, I don't think the market can crash while lots of people believe that it will, ironically.

COVID rate went from low 1s to 2.88 in a matter of days.

As for crash, I think a hit to unemployment might be all it needs.  

If you think about the composition of jobs in the economy, and how much of the BTL sector relies on rent-seeking to cover their costs.... it may not take much at all to tilt things into a horrible direction.

Section 24 kicks in fully as of 2021 too (BTL tax redudctions).  Who knows how brexit will turn out, too.

Prices are made at the edge, after all.  It's too early to call it just yet IMHO.

Edited by blackhole
S21 -> S24
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7 minutes ago, sammersmith said:

Even after all the negative talk of a crash to property prices, there are still people desperate to dive into property among my own circles as well has billy big balls LLs using bouceback loans to buy more BTLs.

True, but actual mortgage availability is becoming an issue. Barclays have just declared they wont give BTLs with an LTD company a mortgage anymore.  Interesting turn of events.

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13 minutes ago, blackhole said:

Barclays have just declared they wont give BTLs with an LTD company a mortgage anymore

If this becomes industry-wide, then yes it would severely limit the ability of LLs to purchase more and remortgage their existing loans with another provider. This would give LLs two unpalatable options: purchase as an individual and be hit with S24, or purchase as a company through a specialist, pricier loan. 

16 minutes ago, blackhole said:

Interesting turn of events.

The above scenario would slam the door shut on a LLs ability to manage existing portfolios through their preferred method of jumping mortgage deals every 2 years, as well as hinder the purchase of new properties. If this happens that would indeed be interesting, especially if this product removal turns out to be a permanent. 

Timing is interesting too given big portfolio LLs have spent the last 5 years moving properties over to Ltd company structures, as well as the completed rollout of S24.   

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2 minutes ago, sammersmith said:

Timing is interesting too given big portfolio LLs have spent the last 5 years moving properties over to Ltd company structures, as well as the completed rollout of S24.   

As you say, lets see if it sticks.  Makes you wonder what is the driver for this turn of events?  Policy change ahead?

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44 minutes ago, sammersmith said:

This is exactly my fear. 

Even after all the negative talk of a crash to property prices, there are still people desperate to dive into property among my own circles as well has billy big balls LLs using bouceback loans to buy more BTLs.

I hope we look back on this period as the peak of stupidity and not the calm before lift off.   

1.5-3m extra unemployed.  Recession huge. Higher inflation. Sustained recession.

Edited by Killer Bunny
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On 22/06/2020 at 09:10, highcontrast said:

Tougher rules for buy-to-let landlords

Well, well, well...

https://www.thetimes.co.uk/article/tougher-rules-for-buy-to-let-landlords-ddx9kvcxq

"Barclays is to stop giving mortgages to buy-to-let landlords who buy property through their own limited company.

From June 26 it will also no longer offer mortgages to private landlords looking to buy properties

Are there many private landlords looking to buy at the moment

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3 minutes ago, Kosmin said:

Are there many private landlords looking to buy at the moment

Someone is buying some of the cheaper 2 and 3 bed houses on my Bucks / Beds searches. I will need to wait and see if they are rented out 

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On 22/06/2020 at 12:20, Peter Hun said:

Limited Company but the directors have to give a Personal Guarantee. So there is no question of using the Limited liability to get away from an outstanding debt.

Given the personal guarantee, these are presumably no different from a credit perspective that traditional BTL mortgages, or perhaps even safer because of the taxation element.

In that case, what is Barclays' motive for this decision?

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5 minutes ago, Ah-so said:

Given the personal guarantee, these are presumably no different from a credit perspective that traditional BTL mortgages, or perhaps even safer because of the taxation element.

In that case, what is Barclays' motive for this decision?

The lender is protected from  default, the benefit to the borrower is tax etc, (not interested from the lenders perspective). I only assume Barclays demand a PG, we do.

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6 minutes ago, Freki said:

I always wondered if there is SDLT fraud with those LTD Co. purchases

If you buy the company that holds the property, why would HMRC be any wiser?

https://www.gov.uk/tax-buy-shares

I don't think it would be fraud as you are not changing title. Having said that, property may have special treatment when its in a company vehicle.

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2 minutes ago, Peter Hun said:

https://www.gov.uk/tax-buy-shares

I don't think it would be fraud as you are not changing title. Having said that, property may have special treatment when its in a company vehicle.

It goes against the spirit of the law in my mind. Why not incorporate my next house purchase, and offer a SDLT free transaction when I come to sell it? If everyone did this, we would get rid of SDLT

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On 22/06/2020 at 09:10, highcontrast said:

limited companies that can be registered to only one person.

What does that even mean? One director? One shareholder? One person is director and shareholder?

This looks to me like a misleading summary by a clueless journalist. It might be a distorted rewording of this: https://www.mortgagesolutions.co.uk/news/2020/06/18/barclays-to-stop-limited-company-and-multi-unit-btl-lending/

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  • 415 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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