The chancellor, Philip Hammond, tackled energy efficiency and Help to Buy in his Budget.
The trouble with the sheer volume of Budget coverage in the press is that it’s easy to overlook some of the less dramatic announcements. Here are two property-related changes you might have missed, along with a rare good-news story for landlords.
Help to Buy has its wings clipped
Last week’s Budget confirmed that the Help to Buy equity-loan scheme, which offers taxpayer-backed loans worth 20% of the purchase price of a new-build house, will be extended until 2023. But from April 2021 it will only be available to first-time buyers. Buyers will also only be able to purchase properties worth up to 1.5 times the “current forecasted average first-time buyer price” for the region, with a maximum of £600,000 for London. This will mean buyers in the north east will only be able to buy houses worth a maximum of £186,100, while those in the north west will be able to spend up to £224,400.
The current iteration of the equity-loan scheme has been widely criticised for pushing up the price of new builds, as it widened the pool of people who could suddenly afford new-build properties and fuelled demand. So it follows that a price cap might push prices down somewhat by tempering demand, perhaps to the point where the original Help to Buy borrowers could have afforded to buy without the scheme. Unfortunately, these people are already (or will soon be) stuck paying the interest on their government loans (which are interest-free for the first five years).
Crackdown on energy efficiency
Another measure from last week’s Budget that escaped many people’s attention will see more landlords required to improve the energy efficiency of their properties. Since April, landlords who own properties with an energy-performance certificate rating of F or G have had to upgrade them to at least band E or face being barred from arranging new tenancies. Yet landlords only had to carry out these improvements where financial support was available to cover the costs.
From 2019, however – a date is yet to be specified – landlords will have to pay for improvements that don’t exceed £3,500. The cost of bringing a house to the minimum energy-efficiency level is typically around £1,200. This new rule will affect 290,000 properties, estimates the government. Most landlords should not be affected by this rule change, assuming their properties already comply.
Buy-to-let borrowers in demand
Mortgage lenders are offering attractive deals to buy-to-let landlords, in a bid to win the business of those who haven’t left the increasingly unprofitable sector. The past few years haven’t been kind to landlords, as the government has brought in various taxation and regulatory changes in an attempt to slow the expansion of the buy-to-let market. In the first half of this year, landlords spent £12.1bn on new buy-to-let purchases, which is 30% lower than the amount spent in the first half of 2015.
So buy-to-let lenders are competing for fewer customers, and adjusting their offers accordingly. Last month the average five-year fixed buy-to-let rate had fallen to 3.4%, the lowest level since data provider Moneyfacts began collecting these figures in November 2011. Leeds Building Society currently offers an “easy start” mortgage, which gives landlords an initial three months of interest-free payments before reverting to a fixed rate of 2.72% for the rest of the five-year period. The Mortgage Works, part of Nationwide Building Society, offers a five-year fix at 1.99% (plus a £1,995 fee), while Sainsbury’s offers a two-year fix at 1.4%.