The on-going debate over interest rates continues to dominate the Private Rented Sector. Landlords all over the UK are gradually having to become experts in the previously little known LIBOR rate.
LIBOR is the rate at which banks lend money to each other and it has become clear that this rate rather than the Bank of England rate will determine the medium term future of Buy-to-Let in the UK.
Last week’s huge cut in the bank base rate did have an effect an LIBOR but UK banks hardly rushed to pass on the interest rate cut. The negative publicity they received on Friday pushed many of them into a grudging response but several including Barclays and HSBC virtually ignored the furore. It’s interesting to note that both Barclays and HSBC have not asked the Government for funds over the past few months.
This leaves landlords all over the country in a quandary. According to the Royal Institution of Chartered Surveyors (RICS) house sales are now at the lowest since records began. Many landlords see this as an opportunity to buy more property. At the same time many landlords are seeing their business pushed into the red because they cannot remortgage.
The problem is twofold. First, LIBOR rates are much higher than bank base rates. Bank base rates are 3%, LIBOR is 4.2%. Second, there are very few lenders willing to lend to landlords.
We spoke to one major broker yesterday and this is the criteria they are now demanding:
Maximum loan to value 70%
Interest cover 125%
No HMOs
No freehold houses converted into flats
No new build, especially flats
Minimum income £25,000
Deposits must be proved
And yet there are more tenants than ever, more demand for rented property than ever. Rents, on average, are rising.
It seems that the banks and the Government are prepared to watch a huge proportion of the Private Rented Sector slip into debt and repossession without lifting a finger to help.
At the same time landlords who have run excellent businesses cannot expand those businesses because they cannot raise the finance to buy more properties.
The Government now effectively controls the largest proportion of the Buy-to-Let lenders and yet they show absolutely no sign of helping this vital sector of the UK housing market. The banks they have supported with our money are now effectively washing their hands of an industry that just 12 months ago they were desperate to lend to.
There are over 800,000 landlords in the UK. It is about time that landlords started to make their concerns known to Government and the banks. It is time for landlords to demand action to support an industry that owns around 1 in every 9 homes in the UK.
If you have any comments you would like to make or any suggestions please email us at enquiries@netrent.co.uk or phone us on 01352 759988.
If you would like help with a mortgage or remortgage please click here Mortgages Through NetRent.co.uk
