Brexit and buy-to-let landlords

The result of the EU referendum last month has caused one of the biggest financial and political upheavals in living memory.

A combination of measures introduced last year and the inevitable post-referendum market slow-down has resulted in uncertain times for buy-to-let landlords.

Mark Carney, Governor of the Bank of England, has stated his intention to keep a close eye on the sector, but also sounded a positive tone, stating: “The core of the UK financial system is very strong, and it will be there for home-buyers and businesses.”

Here are some of the main factors that buy-to-let landlords need to watch out for:

Uncertain property market

In the week following the referendum vote, property sales in London surged by as much as 40% on the previous week, with a month-on-month increase of 29%.

This effect could signal that market fluctuations might be less severe than expected, but is more likely to be an indication that buyers are looking to act before all the Brexit implications become apparent.

The underlying pace of property price rises is beginning to slow. In the three months to June, house prices rose by 1.2% compared to 1.5% in the previous quarter. Brexit might well exacerbate this downwards trend, however it’s too early to say exactly what the market might look like once the terms of the exit are established.

Mortgage rate changes

The Brexit vote is likely to result in interest rates being held at a lower level than had been previously predicted, which might well see mortgage lenders become more competitive with their rates.

Lenders – including Santander, Nationwide and Aldermore – have already slashed their buy-to-let rates or raised maximum loan-to rates with a view to making landlords think again about putting off investment in the wake of Brexit.

Commentators predict that the changes are unlikely to have a significant effect on standard variable rates, but will instead see more lenders following HSBC’s lead in providing a sub-2% five-year fixed rates.

Less bureaucracy

While an alternative framework is yet to be established, one area in which the Brexit decision has the potential to benefit buy-to-let landlords is in the reduction of red tape.

A whole series of new legislation was put into force by the EU earlier on this year, and many landlords have criticised the rules as unnecessarily restrictive. One of the most contentious changes has seen mortgage providers stop lending to borrowers employed by multi-national companies who pay their staff in a foreign currency.

It remains open whether any replacement legislation would be less stringent that current EU guidelines. However, a significant proportion of EU property laws resemble rules that are already in place in the UK, having been introduced to ward off the risky financial strategies that contributed to the financial crisis.

With so much left to be decided, it pays for buy-to-let landlords to stay in close communication with a specialist landlord accountant.

Call on the friendly team at 3 Wise Bears and find out how we can support you through turbulent economic times.