What Coronavirus Means for Property Investors
We’re currently experiencing a strange time in history and the only thing that’s certain right now, is uncertainty. While no one knows exactly what’s on the horizon, here is a brief overview of how the Coronavirus is affecting some property investors in the UK.
Mortgage payment holiday
Due to the economic impacts of coronavirus, the Government has announced that residential and buy-to-let mortgage holders are entitled to a three-month mortgage holiday. This is great news for property owners as gives them some time to assess their finances and get things in order. And for landlords with tenants that can’t pay their rent during this time, it means they’re not stuck paying the mortgage while there’s no rent coming in. BTL landlords have been urged to pass the payment holiday onto their tenants if they’re out of work and struggling to make rent.
Where a payment holiday has been agreed in advance, this won’t lead to any arrears being reported to the credit reference agencies so this will not impact your credit score.
However, if you haven’t come to an agreement with the lender and you miss a payment, this would be reported to the credit reference agencies in line with the normal process.
Boris’ ban on evicting tenants
Boris Johnson has increased the time required by landlords to issue an eviction notice to tenants from two months to three months during the Coronavirus. While it’s a nice gesture for tenants, the Coronavirus Bill means that they’ll still have to pay their rent, whether it’s now or in the future, but they’ll have one extra month to avoid being evicted.
This could be nightmare for landlords in the short-term as affected tenants will run up huge debt with the landlord and most will simply not be able to make the repayments.
Landlords and tenants are being urged to work together to establish an affordable repayment plan, which takes into account the tenants’ individual circumstances. No landlord wants to evict a tenant and have an empty property and it’s in the landlords best interests to come to an agreement with the tenant.
Frozen housing market
After the 2019 general election and with Brexit finally underway, optimism briefly returned to the housing market and prices started to increase. In March 2020, they reached their highest point since 2016. However, with the spread of COVID-19 predicted to affect the economy for a minimum of 3-6 months, it’s not clear how the market will be affected. The government has urged house buyers and sellers to put their move on hold for the time being. Additionally, With most estate agents following social distancing guidelines and cancelling property viewings for the foreseeable future, activity in the market has slowed down.
Many businesses are now working from home to prevent the spread of coronavirus, including surveyors who are not carrying out property valuations for the time being. Because of this, many lenders are unable to provide valuations. Some are willing to provide a desktop valuation; however, it might not be the best deal for you.
Bridging lenders offer more flexibility, but you’ll need to consider the overall scope of requirements, specifically an exit strategy. Will you be able to get the work done during this time and will you be able to sell or let the property to pay off the finance?
The best thing to do is speak to your broker as they can find the best solution for you during this time.
Record low base rate
The Bank of England announced the lowest base rate in history in March at 0.1%. If you have a tracker mortgage, you’re likely to see a reduction in your monthly payments. For property owners and first-time buyers, this means there is a brief window of opportunity to secure a competitive mortgage with low interest rate repayments or re-mortgage onto a better rate.
During this time of uncertainty, it’s important for investors to weigh up every option and avoid acting on impulse. With COVID-19 causing changes daily, be it the markets or new rules implemented by the government, it’s important to stay up to date with all the regular updates and adapt accordingly.
It’s not all doom and gloom, though. There is always opportunity in challenging times and investors may be able to purchase reduced property and secure a great deal once normality starts to resume. Keep in conversation with your broker as they will be on the ball with any changes coming into play with lenders and will be able to help you adapt your portfolio.
Ramsay & White is a specialist mortgage brokerage serving the specific finance needs of property investors across the UK.
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