Reports from the death of buy-to-let might be premature, but there’s no hiding the truth that it’s an elaborate time for you to be considered a landlord.
And as we get ready to a new year, property investors across the country are sure to be deliberating over whether it’s better to buy, sell or refinance their portfolios in 2022.
We’re here to assist, using the solutions to six big questions facing landlords this season, and suggestions about whether property investment can nonetheless be a profitable exercise.
Is now a good time to remortgage my buy-to-let properties?
It might be a big year for buy-to-let remortgaging, as landlords choose to stick rather than twist and lenders tempt them with good rates and incentives.
At the beginning of this month, the typical rate on a buy-to-let fixed-rate mortgage was 3.3% – up 0.08% year-on-year (according to data from Moneyfacts). This follows a reliable year for home loan rates, where five-year fixes dropped in cost striking historic lows in the Autumn.
And the January sales have finally started – with Metro Bank, Leeds Building Society and Clydesdale Bank waking using their festive slumbers this week to chop rates on buy-to-let fixes.
If you’re thinking of remortgaging this year, the growing prominence of fee-free and cashback deals could also offer you a boost – the 2009 week Leeds doubled the cashback on some of its products from lb500 to lb1,000.
David Blake of Which? Mortgage Advisers believes that with more lenders coming on to the market and banks offering greater flexibility when assessing incomes, maybe it's a good year to remortgage.
He says: 'While existing landlords may go through taxed, it isn't all doom and gloom. Remortgaging rates are incredibly low and with such competition on the market, there's arguably more selection of lender and product than in the past.’
Will things improve for portfolio landlords?
There’s no hiding the fact that landlords with four or more mortgage properties (‘portfolio’ landlords) have borne the brunt of reforms in the last couple of years, with changes to lending rules which makes it difficult to get extra finance.
There are signs that things might be improving, however. Before Christmas, Tipton & Coseley amended its affordability criteria to learn effectively for investors to obtain a loan, and just now Paragon launched services created specifically for portfolio landlords.
This trend could provide some respite to portfolio landlords considering selling off a few of their investment properties.
One such landlord, Nicola Bates, told Which?: 'I am close to exchanging on the sale, which will leave me with three investment properties, all on long-term lets. It's now easier to remortgage with three properties rather than four, and I have decided to reduce my portfolio because of the government's attack on buy-to-let landlords'.
Can I depend on good rental yields in 2022?
With the home market stalling amid economic uncertainty, significant capital growth might seem like a distant memory for many landlords, but you will find indications that savvy investors can continue to enjoy good rental yields.
The latest index from LSL was launched the 2009 week and demonstrated that landlords in the North of England are currently enjoying the highest yields, with average yields of 5% within the North East and 4.8% in the North West.
|Region||Yields (November 2022)|
|Yorkshire & Humber||4.4%|
|East of England||3.6|
More so than ever before, planning is everything with regards to choosing a good investment property, with income more squeezed than before.
if you’re thinking of expanding your portfolio in 2022, consider your options, seek information and don't forget that there’s no such thing as a ‘guaranteed’ yield.
Will mortgage interest tax relief cut my profits?
By now, many landlords is going to be tired of listening to cuts to mortgage interest tax relief, that will still erode profits within the years to come.
Landlords filling out their tax returns for 2022/18 prior to the deadline this month are actually only in a position to deduct 75% of their mortgage interest, an amount that will reduce by 25% in the following three tax years, before it’s substituted with a flat 20% credit.
And investors with mortgaged portfolios feel the squeeze.
Gary Williams, a landlord with five properties, told us: 'Changes to mortgage interest tax relief mean my tax bill for that 2022/18 year is around lb1,200 a lot more than last year. I expect this figure to increase to more than lb5,000 once the rules are fully implemented'.
Do I need to worry about HMO regulations?
Previously, you only needed a HMO (house in multiple occupation) licence should you be letting a property three storeys or higher, however in October the rules changed, bring all properties let to five or even more people from more than one family under HMO licensing rules.
How much a HMO licence will cost you – and the hoops you’ll have to jump right through to get one – varies from area to area.
Glenn Richards, a landlord with two buy-to-let properties, told us that these licensing changes had already hit him in the pocket.
He says: 'I let students property with six bedrooms spread across two storeys. This means that under the new rules introduced last October, it now needs a HMO licence.
‘The licence costs in excess of lb1,000 within my area, and it is subject to a HMO inspection, so it seems will concentrate on aspects for example waste management and room sizes.'
Is now the time to purchase property or expand my portfolio?
If you’re considering investing in property in 2022, you’ll need to weigh up the pros – such as a greater range of mortgage options – using the cons – such as tax changes – prior to making a choice.
The investors we spoke to earlier this week told us they’re unlikely to expand their portfolios this season, with a few considering remortgaging yet others planning their exit strategies.
Sentiment about whether buy-to-let is worthwhile in 2022 tended to vary on if the landlord under consideration had outstanding mortgages on their investment properties – and therefore needed to worry about mortgage interest tax relief.
George Smith, an experienced investor with two unmortgaged investment properties, told Which? he has no aim of expanding or cutting down his portfolio this season.
He offers the following advice to first-time investors: 'If I had been new to the marketplace in the current conditions, investing in buy-to-let would not be such a simple and easy to warrant decision.
'Any prospective new landlord will have to possess a professional attitude, seek training making a careful strategic business plan without counting on or expecting short term capital growth.'
‘It’s important to remember that buy-to-let is really a service industry – your tenants are not there to help you money, you are there to provide a rental service to your tenants’.
Things landlords need to know in 2022
As along with mortgage interest tax relief continuing to erode profits, the upcoming ban on letting agents charging fees to tenants could also impact profits.
The new rules, which are likely to enter into force later this season, calls for up-front deposits being capped at five weeks’ rent and landlords and managing agencies being banned from charging tenants for common costs for example referencing and inventories.
You can find out more about the tenant fees ban along with other key developments for landlords within our article on 16 things buy-to-let landlords have to know in 2022.
Note: The names of the landlords quoted in the following paragraphs happen to be changed to safeguard their identities. This story was updated at 09:25am on 14 January 2022.