MortgagesApr 19 2017

Landlords, Lisas and low streets

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Landlords have never had a good press. From Rising Damp’s Rigsby to the antics of Rachman in the 1960s, those renting out a property are never going to win much sympathy. But should we start to feel sorry towards ‘amateur’ landlords – those with only one rented-out dwelling rather than those who have deliberately built property empires? 

There are those who say we should. That is because there are huge changes taking place, which mean that by 2020/21 – and starting in steps from now – buy-to-let landlords will not be able to deduct mortgage costs against the rent they charge, thus cutting the rental income they are taxed on. So that kind of puts the kybosh on those who thought that having a buy-to-let mortgaged property offered a good investment alternative.

By 2020/21 buy-to-let landlords will not be able to deduct mortgage costs against the rent they charge

But wait a minute. The thing about being a landlord is that as well as getting an income from rent, you also gain from any capital growth in the property. That is not going to change – even if property prices do tumble, the chances are they will soon start to rise again. And the private rental sector has grown hugely.  Presumably many of these buy-to-let properties are the one or two-bedroom ones that would traditionally be sold to first-time buyers.

I have friends in both camps: firstly, a couple who own a mortgaged, tenanted flat in a nice part of suburban London, but now live in the country. Then there is a nearly 30-year-old. She lives in a many-roomed shared house in a less salubrious area of London. The first used to live in the flat, but decided to keep it on when they moved. The rent covers (I imagine easily) the mortgage interest. London house price inflation means they have enjoyed a massive increase in the property’s value. No one forced them to keep the flat: they chose to as an investment. And investments are risky – even bricks and mortar. Maybe this tax change is the downside. 

Then consider the other friend. She has got a reasonable job. She could afford a mortgage – after all, rates are low and she already pays £600 a month rent for a room in a house. But she can not afford a garden shed in London. When I was her age my partner and I bought our first home in London for, I think, £70,000: it was more than 20 years ago. Today it would sell for half a million (and was not much bigger than a shed). No wonder she can not afford to buy. So I know who I feel sorry for. It is not the landlords.

The trouble with Lisa

While we are on the subject of first-time buyers, let us consider the Lisa. The new girl in the Isa family launched this month and to little fanfare. Only a few Lisas were available at the time of writing – and just share ones at that.

So what is so wrong with Lisa? Obviously it is not for me (or probably you). It is for the under-40s and is meant to help save towards a first home, although it can also be used for pension savings.

You can save up to £4,000 a year and you get a 25 per cent bonus on your savings – so up to £1,000 a year. Start at 18, put the £4,000 a year in, and you could get a total bonus of £32,000. Excellent: we all like free money.

But, if you take the money out and it is not for buying a home (and that home must cost no more than £450,000) or for retirement, then you lose 25 per cent. While shares should outperform savings, if you are a young person who hopes to buy a home within the next five years, then you might want to leave it in cash – but there are not any cash Lisas (yet).

Currently then, Lisa is probably best suited to a teenager who does not want to buy a home for a while and has enough money to risk it on shares. Know anyone like that? Me neither. 

High-street lows

Do you miss Woolworths? Or maybe you are nostalgic for Timothy Whites (for those under 50: this was a chemist and hardware combo and none too exciting). Anyway, both have long disappeared from our high streets.

The next chapter in the disintegration of our high streets is vanishing bank branches. Where I live I had branches of all four when I moved here six years ago: we are now down to just NatWest and I am keeping everything crossed that it stays.

A high street without a bank is a low street. Yes, I bank online just like you – but then, I am not an old lady who can not use a cash machine and needs help from someone in a branch. Nor am I the small businessman who needs to bank his cash takings.

Bank branches are important to local economies: support yours today – you will miss it if it goes. More even than Woolies. 

Charlotte Beugge is a freelance journalist