Higher mortgage rates and reforms clamping down on tenant evictions are the top two concerns amongst landlords at the moment, according to new research by Mortgages for Business.
Landlords due to remortgage would find mortgage rates are more than 2% higher on average than they were when they set up their current deal, according to data from Moneyfacts.co.uk. It’s no wonder then 63% of landlords named rate rises as their chief concern.
But, following rate hikes, Section 21 reform and changes to Energy Performance Certificate (EPC) regulations were the next biggest worries for landlords. A third of respondents cited these as their chief concern, above the stamp duty surcharge and loss of tax relief.
Under government plans, landlords are set to lose the right to evict tenants at short notice without giving a good reason for doing so.
Until now landlords have been able to use Section 21 of the 1988 Housing Act to evict renters after the end of a fixed term tenancy, with two months’ notice.
Mortgages for Business explained how government plans would effectively create open-ended tenancies whereby landlords would have to give a reason for eviction — such as rent arrears or antisocial behaviour — as well as include evidence of the tenant’s shortcomings.
In future all tenancies will be assured tenancies that will continue indefinitely unless ended by one of the new Section 8 grounds for possession. These include: if the landlord wants to sell the property (or move into it) or if there has been a breach of the tenancy by the tenant.
Why fears over Section 21 may be misplaced
Gavin Richardson, managing director of Mortgages for Business, said fears surrounding the scrapping of Section 21 were a driving force behind landlords not remortgaging and selling- up instead
But, he added, landlords had less to fear from reform of Section 21 than they realised.
“Section 21 notices have been abused for years. They have been used as a vehicle for ‘revenge evictions’, for instance, where renters who have complained about their property are evicted in retaliation.
“I don’t think the reforms will prove to be that bad. First, tenants didn’t have to do anything wrong to justify a Section 21 notice — they could have been paying the rent on time and taking good care of the property.
“Sensible landlords rarely turf out good tenants who pay their rent as they want them to stick around. So this reform will disproportionately hit bad landlords abusing Section 21, rather than the reputable end of the market.”
Richardson also explained tenancies can still be ended if there has been a breach of the tenancy by the tenant.
What’s more, the government has said it would introduce a new ombudsman to settle disputes between tenants and landlords and would digitise the courts’ agenda ensure swift resolutions.
Owners will be able to end a tenancy if they plan to move back in or sell it.
Richardson added: “The loss of full tax relief on mortgage interest payments for individual landlords, the stamp duty surcharge on additional property purchases, and the need to ensure properties meet energy efficiency rules expected to apply from 2025 are all far more significant for landlords.”
Rachel Springall, finance expert at Moneyfacts.co.uk, said landlords who were concerned about these reforms or mortgage rate rises should seek expert advice before making a decision about what to do next.
She said: “Interest rates are only part of the decision-making process when entering a buy-to-let investment. Whether that be for new or existing landlords, it is always wise to seek advice to ensure it is the right time to commit to a deal.”
