For buy-to-let landlords coming to terms with tax relief cuts, new energy efficiency rules and the upcoming tenant fees ban, a long Brexit delay and additional property market uncertainty might seem such as the latest in an unwelcome series of events.
But the way landlords really be affected by Brexit? Could certainly be time to help make the the majority of cheap mortgage rates and market jitters, or perhaps is it best to sit tight and ride the storm?
Which? explores the impact of Brexit around the buy-to-let housing industry, and just how landlords can prepare for the uncertainty it's bringing.
Brexit and Right to Rent
The government's controversial To Rent regulations require landlords to ensure their prospective tenants are allowed to live in the UK.
Right now, however, the insurance policy is within a state of confusion. The government is yet to provide assistance with what can happen towards the rules after Brexit, and a High Court judge recently ruled the policy breaches the ecu Convention on Human Rights.
This uncertainty could cause issues for landlords, considering that two-thirds of EU nationals in the UK reside in the rented sector.
David Smith from the Residential Landlords Association says: 'Landlords aren't border police… the federal government needs to publish clear and practical guidance concerning the implications of Brexit on who landlords can and cannot rent to.
'If they don't, more landlords will end up increasingly fearful about renting to non-UK nationals, using the prospect of facing prosecution.'
What is appropriate to book?
The To Rent policy has been around since 2022. It takes landlords to check on a potential tenant has the to live in the UK.
Landlords must request original identification documents from tenants and copies of them for the duration of the tenancy. Landlords can get advice on conducting checks by calling the government’s helpline on 0300 069 9799.
House prices and Brexit
It’s no secret that the property market has slowed down because the EU referendum in 2022, but any predictions of the crash have to date been well wide from the mark.
The newest data from the Land Registry demonstrated that in January, the average UK house price was lb228,147, the lowest figure seen since May last year.
But as the market is becoming more price-sensitive, it hasn’t ground to some halt – and also the number of properties for sale has actually increased.
Data in the HMRC implies that in February 2022 the amount of property transactions increased to 101,780, up from 99,060 last year.
Is now a good time to take a position?
Theoretically, price drops are great news for buy-to-let investors seeking to grab a good deal, but in truth, many landlords remain unwilling to expand their portfolios right now.
In many cases, this is less about Brexit and much more concerning the challenge of turning profits considering buy-to-let stamp duty rules, mortgage interest tax relief cuts and also the upcoming tenant fees ban.
The National Landlords Association (NLA) says that with regards to grabbing a buy-to-let bargain, things may go in either case as Brexit rumbles on.
Meera Chindooroy of the NLA says: ‘A weakening from the benefit of UK investment could drive prices down, or even the lack of certainty could drive demand for the relative stability of bricks and mortar.’
Landlords look further afield for yields
With their profit margins coming under pressure, there are signs that landlords are scouring the UK for better yields.
New data from Hamptons International shows that London-based investors are increasingly looking outside of the capital.
The agency’s research claims that 59% of London-based landlords purchased their buy-to-let properties elsewhere in the united states over the past year.
Mortgage affordability for landlords
Since the EU referendum in 2022, the average rate on the fixed-rate buy-to-let mortgage has came by nearly half a percent, according to data from Moneyfacts.
| Date | Average buy-to-let fixed rate |
| June 2022 | 3.71% |
| April 2022 | 3.26% |
And there has been signs, too, that lenders have looked to entice buy-to-let landlords by cutting up-front fees, and in some cases, offering cashback on their products.
While fixed rates are currently low, it’s possible that costs could rise when the Bank of England base rate increases from its current level of 0.75%.
So far, the Bank of England governor Mark Carney has played his cards close to his chest, suggesting that with so very little set in stone around Brexit, it’s difficult to say what's going to happen to interest rates.
Why is that this important? Well, base rate rises can lead to mortgages increasingly expensive.
When the speed increased from 0.5% to 0.75% in August 2022, the typical buy-to-let fixed deal increased on price from three.14% to three.25% within the space of three months.
| Date | Base rate change | Average buy-to-let fixed rate | % change within three months |
| August 2022 | Down from 0.5% to 0.25% | 3.65% | -0.18% |
| November 2022 | Up from 0.25% to 0.5% | 3.19% | -0.03% |
| August 2022 | Up from 0.5% to 0.75% | 3.14% | +0.11% |
Are landlords still getting mortgages?
According to the most recent lending data in the trade body UK Finance, thousands of landlords still getting mortgages each month – though the marketplace is contracting somewhat.
The newest index shows that in January, the amount of mortgages granted to landlords for house purchases dropped by 1.8% to 5,500, as the quantity of buy-to-let remortgages fell by 4.2% to fifteen,800.
What will happen to rents?
This isn’t strictly related to Brexit, but the upcoming tenant fees ban could result in some landlords leaving the sector.
But as the ban will result in higher costs for many real estate investors, this insufficient supply could bring higher rents.
Property expert Kate Faulkner says: ‘While tenant fees are now being banned from June, rents will probably rise further due to lack of stock, meaning now is not a particularly bad time to be considered a landlord so long as you really understand your objectives and whether the deal stacks up both now as well as in the long run.’
The latest monthly report from ARLA Propertymark suggests rents already are on the rise, with 34% of letting agents saying they witnessed landlords increasing prices in February – an amount that’s up 14% year-on-year.
