Hello readers. This week has been a busy one for the Home Share team as we have rapidly adjusted to working from home.
I have continued liaising with investors and landlords, who are putting plans in place to ride out this period of lockdown and economic effects of the virus. There have been two main announcements this week: financial support for the self-employed along with the housing market bring put on hold.
In addition to this mortgage lenders have started to become more cautious, with some such as Lloyds banking group and Barclays temporarily pulling many of their mortgages and Lloyds also no longer offering mortgages or remortgages. In addition, some are asking for at least a 40% deposit. It is too early to see how wide this impact will be, so it is one to watch.
Support for the self-employed
This week brought the long-awaited news about financial support for the self-employed, however it has come under criticism by those who are directors of a limited company.
The scheme will allow those who are self-employed or members of a partnership to claim taxable grant worth 80% of profits up to a maximum of £2,500 per month for the next three months.
The grant does not apply to those whose profits exceed £50k and those applying must:
- Have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
- Have traded in the tax year 2019-20
- Are trading when apply, or would be except for COVID-19
- Intend to continue to trade in the tax year 2020-21
- Have lost trading/partnership trading profits due to COVID-19
In order to calculate this, HMRC will work out the average profit from the past three years to create a monthly amount. More information can be found here and if you are eligible for this scheme, HMRC will contact you.
This scheme has however, come under criticism by company directors because it does not apply to those who pay through a combination of dividends and PAYE.
Support may be available through the job retention scheme, however in order to quality, directors must be furloughed for the period of time (furloughed directors can still carry out statutory obligations however).
This would apply to the majority of property investors due to the changes that have led to properties now being purchased this way so with tenants potentially asking for a mortgage holiday (and landlords not being able to just shut down) it can be been seen as though these people have been overlooked.
Housing market on hold
Whilst the government has not officially halted the housing market, it effectively has as it has stopped estate agents from marketing new homes and banned visits to those already for sale.
In addition to this, with removal companies not allowed to operate, there is no realistic way to move and David Hollingworth, Director & Broker at L & C Mortgages commented that “the purchase market will effectively go into cold storage”.
The Financial Times has also reported that those who have exchanged contracts will now be able to extend their mortgage offers for another three months to enable them to move at a later date.
This does present a bit of a minefield as Laura Conduit said: “The strict legal position is if you have exchanged and have a completion date, then you must complete on that date. It’s all going to come down to how nice people are.”
If you have questions about the purchase of a new property, I will be more than happy to help where I can. I would strongly advise that you speak with your broker however, if your question relates to the lending element.
The situation continues to develop, and I will be sending you some tips next week on how, as property investors, we can make the most of this opportunity. In addition, I will be giving you an update on the eviction ban along with mortgage holidays.
Stay home, stay safe and as usual, if you need any advice please contact me by emailing firstname.lastname@example.org.