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The buy-to-let market has seen some very significant changes in 2016, most significantly the increase of the additional 3% in stamp duty on any property you own in addition to your primary home.

What this means for those looking to invest their money in buy to lets or property generally may not find the same kind of sound investment that property once provided and offered.

The hike in stamp duty means that any buy-to-let property now attracts a 3% surcharge, which is a considerable increase from the previous rate. Under the old system, if you were buying a property for £200,000, you would pay nothing on the first £125,000 and 2% on the remaining £75,000, resulting in a stamp duty tax bill of £1,500. Now with the 3% levied on the first £125,000 and 5% on the £75,000, you get hit with a much larger £7,500 stamp duty tax bill. This now makes the wait to get additional cost back from any profits much longer.

The longer term prospects for the financial health of buy-to-let does not look good. From April 2017, new limits are being introduced on the amount of mortgage interest that can be offset against rent payments.

It’s a complicated system that some predict will transform profitable buy-to-lets into loss-making properties in most locations, which in turn could force landlords to raise rents considerably or put their properties up for sale.

The chancellor has also stated there will also be cuts to the ‘wear and tear’ allowances, which allow costs for maintenance to be offset against rental income, making achieving a profit even harder to achieve for landlords.

There are also plans in the pipeline from the Bank of England for greater restrictions on who will be eligible for a buy-to-let mortgage. These will mean a wider consideration of a potential landlord’s financial situation, including scrutiny of their monthly income and outgoings, as opposed to just consideration of the rental income of the property under the current system.

The landlords association feels this is a deliberate ploy by the chancellor to free up housing to substitute those the government has failed to plan for.

Ultimately, if you are looking to enter the buy-to-let market soon, you should consider the returns and these new rules. When investing it is always wise to spread your investments and have a diversified portfolio that doesn’t rely solely on placing your money in property just in case as now bricks and mortar means that, even if matters in the property market don’t go your way. 

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UK interest rates will stay unchanged at 0.5% after the Bank of England rate-setters voted 8-1 for no change.

Ian McCafferty, who is one of four external members of the Monetary Policy Committee (MPC), was outvoted by other members but has voted for a quarter-point rise at the past four meetings.

The nine rate-setters on the MPC have predicted that inflation would stay below 1% until the second half of 2016 and will be slightly positive in November despite it standing at -0.1% in October, as measured by the Consumer Prices Index (CPI).

The European Central Bank worked towards boosting the Eurozone economy last week when it cut its overnight deposit rate and extended its €60 billion stimulus programme by six months.

The current members of the MPC have not been part of the committee when rates have been previously raised or cut but the Federal Reserve in the US is expected to raise rates at its policy meeting some time next week.

Hailfax, the UK’s biggest mortgage lender,just released its 2016 outlook for the UK housing market,  and although the report shows that house prices are going to keep rising over the next year, the rate at which they’re going to grow is set to slow down.

House prices are set to increase by between 4% and 6% in 2016, as increasing affordability problems and the prospects of an interest rate rise put the brakes on the property market

Although all regions are expected to experience price increases in 2016 the lender reported, price growth is expected to slow more sharply in London than elsewhere in the UK.

Despite low levels of house building, Halifax predicted improvements will be made over the medium-term beyond 2016 to help bring demand and supply into better balance.

Halifax’s report, led by housing economist Martin Ellis, said: “There is little reason to expect any fundamental shift in the key market drivers in the immediate future. As a result, the substantial imbalance between supply and demand is likely to persist, maintaining upward pressure on house prices in 2016.”

“Nonetheless, with house prices continuing to increase more quickly than average earnings, it is increasingly difficult to get on the housing ladder,” Mr Ellis stated.

“This ongoing development, combined with the growing prospect of an interest rate rise, should start to put the brakes on house price growth during the course of 2016.”

Ellis said he expects interest rates to rise at a gradual pace and to have a “significant” bearing on house price developments in 2016 and beyond.

“When the time finally comes for the first rise in official interest rates, the Bank of England is likely to adopt a cautious approach to raising rates due to concerns about households’ ability to make higher repayments on their debts. Interest rates are, therefore, likely to rise at a gradual pace.”

 

Figures have shown that the UK unemployment rate fell to 5.4% in the three months to August and is now at a seven-year low.

Between June and August, the number of people out of work was 1.77 million, which is down from 79,000 people from the previous quarter. The employment rate is at its highest since records began in 1971 as the number of people in work rose by 140,000 bringing the employment rate to 73.6%.

When compared to the previous year, the amount of people working full-time jobs in the three months to August increased. 22.77 million people were working full-time, which is up 291,000.

Those working in part-time jobs have also increased as it rose by 68,000 to 8.35 million.

The Office for National Statistics (ONS) said that the UK unemployment rate was the lowest jobless rate since the second quarter of 2008.

In terms of income, workers’ total earnings including bonuses were up 3% from the year before. However this was less than expected. With bonuses excluded, growth in average weekly earnings slowed to 2.8%.

Although wage growth remains weaker than before the financial crisis, it has managed to pace faster than the Bank of England predicted earlier in the year.

The Bank of England is holding UK interest rates at a record low of 0.5% and the Bank’s Monetary Policy Committee (MPC) voted 8 to 1 to keep rates the same.

UK interest rates have remained unchanged for over six years and Ian McCafferty, a committee member, disagreed and voted for a quarter-point rate rise for a third month in a row.

Inflation will stay below 1% until spring 2016 and cost pressures in the UK’s labour market is rising too slowly for inflation to return to the Bank’s 2% target, the central bank said.

Although inflation has stayed around 0% for a few months, the Bank indicated that the fading effect of last year’s oil price falls and robust domestic growth would cause it to increase to 2% next year.

Official figures have shown that the UK economic growth for the second quarter of the year was unrevised at 0.7%. The figure that was released in July was increased because of a sharp rise in oil and gas production.

On Friday, the Office for National Statistics (ONS) did not change the reading for the three months to June. The figure was higher than the 0.4% growth recorded for the first quarter of the year.

The biggest contribution to trade in four years came from net trade boosting GDP by one percentage point in the second quarter as exports jumped. However, economists believe that this could be temporary because the strength of sterling means that British goods are more expensive abroad.

Business investment is on the rise as it rose 2.9% in comparison with the first three months of 2015. In the first quarter, household spending had a 0.9% rise whereas it only increased by 0.7% recently.

Last year the UK economy expanded by 3% and the Bank of England has forecast a 2.8% growth this year.

UK inflation rose in July with the Consumer Prices Index (CPI) measure rising to 0.1%. In June, the percentage stayed at 0% and the Office for National Statistics (ONS) stated that the main reason that inflation rose is because of the lower prices of clothing.

However, the Retail Prices Index measure of inflation has stayed the same at 1% and this will be used to calculate rail fare increases. The fares will remain the same until next year.

For the last six months, CPI has been almost flat and turned negative in April. This is the first time since 1960. CPI inflation strips out increases in energy, food, alcohol and tobacco. In addition to this, the underlying measure of CPI inflation rose to 1.2% in July, which is a five-month high. The ongoing supermarket price war could be the reason that CPI was held back, with a 2.7% year-on-year fall in the price of food and non-alcoholic drinks.

Taking all this into consideration, there has been question over when the Bank of England might raise interest rates. The Bank has a target inflation rate of 2%.

In the past two months, the drop in the price of oil has fallen by nearly a quarter, which is why analysts have said that the inflation rate could fall back again.

The Bank of England has kept UK interest rates at 0.5%. Not only that but the Bank also kept the size of its bond-buying stimulus programme unchanged at £375 billion. The decision comes more than six years after the record low was introduced. The Bank’s Monetary Polity Committee (MPC) made the decision.

Mortgage borrowers have benefited from lower repayments and the half-dozen years of ultra-low interest rates have cut savings’ returns. In April, ultra-low inflation turned negative to -0.1%, which has put on hold expectations about the Bank raising rates in 2015.

The Bank claimed in its quarterly inflation report last month that it was likely to raise the cost of borrowing in the middle of next year. On a different note, the recent ONS figures confirmed that the UK gross domestic product (GDP) growth slowed to 0.3% in the first quarter. This was the worst result since the end of 2012.

In all previous meetings so far this year, the nine-strong MPC has voted unanimously to keep rates on hold.

Cashless payments have overtaken notes and coins for the first time, according to the Payments Council.

The use of cash by consumers, businesses and financial organisations fell to 48% of payments in the year before, the Payments Council said. Electronic transactions such as high-value transfers and debit card payments made up the other 52%. Cheques are also included in this percentage.

Cash is used less than before, with debit card, contactless and mobile payments on the increase according to the Payments Council, which oversees the system of transactions. Over the next 10 years, cash volumes are predicted to fall by over 30%.

In 2014, cash remained the most common payment method among shoppers and businesses even though the growth of digital money continued to sprout. During this same year, some 18 billion cash payments were made in the UK, which was worth around £250 billion.

Debit cards accounted for 24% of payments and direct debits accounted for 10% only. Cash was still the most popular during this period and was used more than eight out of ten purchases in places such as pubs, clubs and newsagents. However, it was used in fewer than three out of ten in petrol stations.

The Payments Council predicts that in 2016, the majority of transactions will be made by cashless payments. This is mostly because younger consumers say that they are less reliant on cash. Despite this, cash is expected to see a significant overhaul in future years, with a new 12-sided £1 coin entering circulation in 2017 and plastic £5 and £10 notes coming into effect by the Bank of England in 2016 and 2017.

The Bank of England has cut its UK growth forecast for 2015 from 2.9% to 2.5% and for the next year, 2.9% to 2.6%, governor Mark Carney revealed in his quarterly inflation report. Despite this, the UK is still a country with one of the fastest growth rates in the developed world.

Deflation could emerge during the year, but inflation was expected to pick up towards the end of the year, Mr Carney also commented. In March, inflation was at 0% for a second month in a row, which is well below the Bank’s 2% target.

The figure marks the lowest rate of Consumer Prices Index inflation since estimates of the measure was first brought into effect in 1998. To add to this, for over six year the Bank’s base rate has been at a record low of 0.5%.

Mr Carney blamed falling inflation on a sharp fall in energy prices, decreasing food prices and strong sterling. He also said that these factors explained about three-quarters of the fall in inflation. Inflation should return to its 2% target within two years before rising above this, he said.

In terms of wage growth, the Bank lowered expectation in 2015 from 3.5% to 2.5%. The Bank did not give a positive reaction to productivity growth as it sees a disproportionate number of new jobs as low skilled and low-output. In the coming year, productivity growth is forecast to improve modestly before remaining below past average rates.