According to tenant referencing and insurance provider FCC Paragon, buy-to-let landlords are increasingly looking to invest in products that protect their portfolios.
Despite rising costs in recent years, FCC Paragon says 2017 was a record year for sales of rental protection products.
Landlords are being heavily affected by these costs, specifically the 3% Stamp Duty surcharge introduced in April 2016 and the gradual phasing out of buy-to-let mortgage interest tax relief, which started last year. The Stamp Duty surcharge applies to the purchase of buy-to-let properties.
Despite these financial strains, the commitment to protecting their investments remains.
Bryn Cole, Managing Director of FCC Paragon has said: “We’ve found that as the stakes get higher, landlords are actually more willing to invest in rental insurance and protection products.
“Arguably, a more regulated rental sector – with increased costs and government interference – has forced out many of the risk-taking investors and left behind the landlords who are keen to maintain a long-term project and protect it accordingly.”
It has been noted by FCC Paragon that this trend for the increased sales of rental protection products has so far continued in 2018, in an attempt to reduce risks where possible. Reports from the firm show that 40% more rent protection products have been sold in January 2018 than in the same month last year. Having such products in place can protect a landlord in the situation that a tenant defaults on their rent, providing a substitute to prevent any financial collapse their end.
Without such backup, a landlord runs the risk of not being able to keep up with the mortgage repayments of their buy-to-let property. If you are wanting to learn more about the help available to prevent such situations, have a look at our Rent Guarantee and Legal Expenses cover on the Just Landlords website.
Cole describes the current rental climate for landlords as being a “perfect storm of continually rising rents and the prospect of further interest rate rises”, therefore it is only sensible that landlords are looking for this extra security.
He went on to say: “It seems to us that many landlords are of the mind-set that spending now could save them significant amounts of money in the future.”
FCC Paragon believes it should also be considered that the increasing costs of living, particularly in London, are plausible contributions to the influx of landlords committing to rental protection products.
“Even the most reliable of tenants could default on their rent due to a change in circumstances and as rent and living costs rise, unfortunately the chances of reliable tenants falling into arrears increases,” Cole concluded.