Housing benefit cuts deter landlords from letting

Graham_Devon

http://www.bbc.co.uk/news/uk-12937116

Interesting article, as it highlights the minimal room to manouvre for BTL landlords.

Colin Bryan, a Sheffield-based landlord, who rents 35 properties to benefit recipients told BBC Radio 4's World at One programme that "the sums no longer add up."

Mr Bryan believes that interest rates, currently 0.5%, are bound to go up in the next 18 months, increasing his mortgage repayments just as his income from tenants will be falling. Therefore he will no longer rent out any of his properties to housing benefit claimants.

"If we don't do something now, in 18 months time I am likely to be bankrupt because we can't afford to continue with the cuts that are coming," he said.

Shame.

But more noticibly:

Eighty-six percent of respondents said they could not afford to cut their rents, while almost two-thirds said they could find non housing benefit tenants.

86% cannot afford to cut rents!? 86?!

What's going on if 86% simply can't afford to cut rents?! What on earth is going to happen when interest rates rise if people, at these interest rate levels on mortgages cannot afford to cut rents!?

Bluster to try and scremonger an reverse the policy? Or reality when it comes to BTL?

Callie22

We're currently looking to rent somewhere and all we've heard from Letting Agents is that the LLs simply cannot afford to reduce the rents. Even offers that are just £10 or £20 below the asking price are being refused as the LLs apparently can't afford it - there's absolutely no negotiation going on. In fact, we've even had the opposite going on, with LAs trying to wheedle higher rents as the advertised prices apparently won't cover the mortgage. I wouldn't say either that there's a shortage of rental property where I live, the market for good quality property is fairly brisk (as always) but there are loads of new build flats and houses that are sitting empty for ages.

As a tenant it's a bit worrying when even LAs are admitting that LLs are maxed out. Since our last move and this there's been a really noticable deterioration in the quality of rental properties that are available, which suggests to me that many LLs are really struggling to afford even basic maintenance. We're definitely not looking at the bottom of the market locally and it's more than a bit concerning.

Thrugelmir

Graham_Devon wrote: »

But more noticibly:

86% cannot afford to cut rents!? 86?!

Hard to believe. Or is a matter that they don't wish to cut their rental rates?

Graham_Devon

Thrugelmir wrote: »

Hard to believe. Or is a matter that they don't wish to cut their rental rates?

That's what I thought, got to be bluster to try and scare the government into reversing cuts, surely!?

Thrugelmir

Graham_Devon wrote: »

That's what I thought, got to be bluster to try and scare the government into reversing cuts, surely!?

Maybe this is one reform that will benefit the entire country.

HAMISH_MCTAVISH

AFAIK only around 55% of rented properties have a mortgage, and the LTV distribution is similar to residential. So around half have less than a 50% LTV.

It's not an interest rates issue for most.

More a "screw you I'm not lowering the rents because little Fiona's riding lessons are expensive" issue.

Jimmy_31

Thrugelmir wrote: »

Hard to believe. Or is a matter that they don't wish to cut their rental rates?

I hope its that they cant afford to cut their rental rates i really do.

Thrugelmir

HAMISH_MCTAVISH wrote: »

AFAIK only around 55% of rented properties have a mortgage, and the LTV distribution is similar to residential. So around half have less than a 50% LTV.

Unlikely as the boom of BTL occurred in the past 10 years. On a 25 year repayment mortgage 60% of the capital balance is owed after 15 years. In fact the median point is 17.5 years to reach 50% LTV.

Besides most BTL'ers rely on tax efficiency by offsetting mortgage interest to make their investments "work".

Graham_Devon

Thrugelmir wrote: »

Unlikely as the boom of BTL occurred in the past 10 years. On a 25 year repayment mortgage 60% of the capital balance is owed after 15 years. In fact the median point is 17.5 years to reach 50% LTV.

Besides most BTL'ers rely on tax efficiency by offsetting mortgage interest to make their investments "work".

Are most not on interest only also?

Sure I saw this somewhere, but may not have been BTL's.

Thrugelmir

Graham_Devon wrote: »

Are most not on interest only also?

Most likely. As that's what I was referring to as tax efficiency. Particularly for reluctant landlords.

Graham_Devon

The 55% of rented properties having mortgages may be correct though thinking about it.

Rented properties will, I guess, include social properties and large rental property companies that own entire blocks of flats and such like.

Difference here, is were talking BTL landlords.