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Buy-to-let mortgages pricing out student rental market

Buy-to-let mortgages and how they are affecting the student rental market.
By Editorial on Mar 21st, 2017   @freelotteriesuk

As the Bank of England imposes tough new banking regulation rules for all buy-to-let lenders, the UK student rental market feels the strain.

The changes mean that lenders require all buy-to-let landlords to prove that they can cover their mortgage payments by 145 per cent if their mortgage rate went up to 5.5 per cent.

The change is a significant jump from the previous 125 per cent coverage required; forcing all new landlords to increase rental prices to be able to afford the changes. From next month, the costs are set to get worse as the government begins to remove tax relief currently used to pay for part of their mortgage interest.

Landlords also will effectively be taxed on turnover, and not just profits after mortgage costs. From April 2017, existing rules which allow landlords to offset mortgage interest against tax will be phased out, restricting the amount of mortgage interest landlords can offset against tax on property investments.

The impact on the student letting market

Questions have been raised about how this could impact the student letting market, and how hard it is going to hit students’ pockets.

Danielle Cullen, managing director at  StudentTenant.com says that these changes risk students in the UK being put on the verge of a severe rental crisis.

'Not only are we going to see a hike in rental costs for students to offset the change in buy-to-let mortgage rates, we’re also going to see a huge fall in mortgage applications as it’s just not a worthwhile investment anymore.

'The government is gradually pricing out new student landlords from accessing the rental market, which is causing huge problems with the very limited supply we’re already seeing in certain areas. Unfortunately, it’s another costly setback for students who will have no choice but to pay the increased rental costs.'

There’s already huge pressure on students to cover the costs of bills, pay rent and enjoy their university experience while studying, Cullen adds.

'Another increase in rental costs is adding more pressure. With the hike in university fees, lower maintenance loans and now the impact of the buy-to-let mortgage changes, it’s no wonder students are questioning whether all the debt and stress is really worth paying for higher education.'


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