1. Rising Interest Rates and Mortgage Payments
As 2024 began, 47% of landlords identified increasing mortgage payments and rising interest rates as their primary concerns, marking this as the most pressing issue they face this year.
On a positive note, average mortgage rates for both individual landlords and those operating through Limited Companies have eased since the start of the year and are significantly lower compared to the same period in 2023. In August, average rates for 2-year fixed products are 5.87%, while 5-year fixed rates are at 5.95%. This shows a slight reduction from January rates of 5.97% and 5.96%, respectively, indicating a gradual decrease over the past eight months. When compared to August 2023, the drop is more pronounced, with rates down from 6.18% and 6.62% last year.
The same trend is evident for Limited Companies. At present, average rates for a 2-year fixed rate stand at 5.88%, with 5-year fixed deals at 5.95%. This marks a minor decrease from January’s figures of 5.99% and 5.97%, and a more significant decline from the 6.19% and 6.62% rates recorded in August 2023.
2. Tenants Struggling to Afford Rent
Close behind rising interest rates, 44% of landlords expressed concern about tenants struggling to afford rent payments. Research by Molo revealed that 59% of UK landlords have seen an increase in late rent payments since 2021, driven by the ongoing cost-of-living crisis.
Although data for 2024 is not yet available, rising rents continue to heavily affect private renters. The annual rate of rental growth up to April 2024 was 6.6%, the slowest in 2.5 years. However, despite this slowdown, the average rent for a new tenancy in the UK remains high, standing at £1,226, according to Zoopla.
3. Safeguarding Your Property Investments
As mortgage rates have eased only slightly rather than dropping significantly, rental affordability for tenants is unlikely to improve in the near future. If your tenants are facing financial difficulties, maintaining open and transparent communication is crucial. By doing so, you may be able to reach a temporary arrangement that alleviates financial pressures for both you and your tenants.
4. Changes to Tax Laws
Concerns about potential changes to tax laws were significant for 36% of landlords, particularly regarding buy-to-let income tax rates and capital gains tax (CGT) allowances. On a positive note, there have been no major tax reforms affecting the private rental sector (PRS) this year. In the highly anticipated Autumn statement, the new Labour government confirmed that taxes on working people will remain unchanged, though they have not ruled out changes to CGT. For now, landlords must wait to see whether Rachel Reeves will offer more support than her predecessors.
Navigating Legislative and Tax Changes
Staying informed about changes to tax laws and landlord regulations is more crucial than ever. If you have concerns about how tax changes may affect your property investments, it’s advisable to consult a qualified tax advisor, particularly one with expertise in the buy-to-let market.
5. Rising Maintenance and Redecorating Costs
In 2024, 34% of landlords identified increasing maintenance and redecorating expenses as a major concern. Although inflation has eased slightly, leading to a small reduction in costs, the reintroduction of minimum EPC targets could require landlords to invest significant amounts in improving their properties’ energy efficiency. Further clarity is still awaited from Ed Miliband on how these plans will be implemented, especially regarding spending limits and potential exemptions for landlords.
6. Increasing Landlord Insurance Costs
In a recent industry survey, 34% of landlords cited rising landlord insurance premiums as a major concern. Given the current market environment, many landlords are seeking policies with enhanced protections, making it more difficult to lower costs.
“Despite the challenges landlords are coming up against this is a good opportunity for those landlords staying in the industry to face reduced competition and to focus on handling as a business with sound financial fundamentals and robust process to make a smooth operation. Absolutely there are still great opportunities for save investors and there will always be strong demand and need for the private rented sector, regardless of what the government throws at us!”
Director at Horizon Management Chris Browne
Related Articles
- Should I Let My Tenant Decorate?
- The Importance Of Building A Good Relationship With Your Tenants
- What Landlords Should Know About ‘White Goods’
- Starting your Property Portfolio
- Landlord’s Guide to Letting Property
