Chancellor Rishi Sunak unveiled a range of packages to help the economy in his Summer Statement in July, with particular support for the housing market. Two elements will be of particular interest to landlords – a Stamp Duty Land Tax reduction and new Green Homes Grants for home improvements.

Let’s look at the implications of both.

Stamp Duty Land Tax

The Chancellor announced that he was raising the Stamp Duty threshold on residential property transactions from £125,000 to £500,000. This will run from 8 July 2020 to 31 March 2021 and means that home buyers purchasing a property up to £500,000 will pay no Stamp Duty.

For buy-to-let landlords, the 3% surcharge introduced in April 2016 remains, so whilst they will see their Stamp Duty bills reduced, it’s not as good news for homebuyers.

Before, landlords would pay 3% SDLT up to £125,000 of the property’s value, 5% between £125,000 and 8% between £250,000 and £925,000. Between now and 31 March next year, landlords will pay a flat 3% of the transaction value up to the £500,000 threshold.

Our analysis shows that this will typically benefit those landlords in Southern regions more as property prices are higher in those regions, particularly London and the South East.

Prior to the Chancellor’s Stamp Duty announcement on July 8, a landlord buying a property in the North West at Paragon’s 2019 average property price of £170,191 would pay £6,009 in Stamp Duty. A landlord in London buying a property at the average price of £578,167 would pay £36,253.

Following the Chancellor’s Stamp Duty holiday, the North West landlord’s Stamp Duty cost reduces to £5,105, with the London landlord’s tax bill falling by £15,000.

Hamptons International has calculated that the average SDLT bill paid by buy-to-let investors across England will fall from £7,120 to £2,400, a reduction of 66%.

Green Homes Grants

The Chancellor also unveiled a scheme to help homeowners and landlords improve the energy efficiency of their homes and support the UK to become carbon neutral by 2050.

The Government will introduce a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household.

For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. In total, ministers say this could support over 100,000 green jobs and help strengthen a supply chain that will be vital for meeting our target of net zero greenhouse gas emissions by 2050. The scheme aims to upgrade over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills.

The Green Homes Grant will cover a variety of energy saving home improvements. Whilst a comprehensive list has not been released just yet, some of the confirmed improvements are wall and roof insulation and double glazing.

Although full details have yet to be released by the Treasury, applications are expected to be open from September. 

A month is a long time in the buy-to-let mortgage market, which has always been a dynamic sector that continually changes in line with social, political and economic factors. The big news for landlords in July was the announcement of the stamp duty cut in England for properties valued up to £500,000.

This measure introduced by the government to help stimulate the housing market was also extended to buy-to-let properties, which could really encourage landlords to start actively seeking to expand their portfolios again. Although the 3 per cent surcharge for second homes is still applicable, buy-to-let investors would previously have paid 5 per cent stamp duty for properties up to £500,000, so there are big savings to be made while this incentive is in place.

As the government seeks ways to kick-start the housing market, it is also providing Green Home Grants to homeowners to help them make their homes more energy efficient. Once the scheme is launched in September, vouchers of up to £5000 can be applied for to help cover the cost of insulation and double glazing.

While businesses around the UK start to open up again, lenders are also returning to a more ‘business as usual’ approach to buy-to-let finance. There has been a flurry of activity over the last month, with lenders re-evaluating their lending policies and re-pricing their product ranges as competition increases in the marketplace. This is creating a downward pressure on mortgage rates, resulting in better deals for landlord customers.

Lenders are returning to more specialist areas of lending such as for HMOs and limited company applications with a wider range of products now available. Lenders such as Leeds and Hampshire Trust Bank are also offering products for holidays lets again, which presumably follows on from the opening up of these businesses around the UK. Some lenders may hold off returning to this niche sector while there is still the possibility of a Covid-19 second wave, but with the growing popularity of staycations in the UK, the market for holiday lets looks promising.

In support of landlords during the coronavirus pandemic, some lenders will take account of furloughed income when assessing the affordability of buy-to-let mortgage applicants. However, lenders may not take such a lenient view of applicants who have applied for a buy-to-let mortgage holiday during the crisis as this could be interpreted as demonstrating underlying cash flow issues with management of the property.

Although still in a state of flux, the buy-to-let mortgage market is continuing to recover and there have been many positive changes in recent weeks. With our knowledge and expertise, we aim to help you find the perfect buy-to-let mortgage.