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Buy to let investors are looking to products that protect their portfolios, according to new information from FCC Paragon.
FCC Paragon, a tenant referencing and insurance provider found that 2017 was a record year for the sales of rental protection products. This is in spite of steady increases in costs for landlords in recent years.
Two of the most significant costs have been the 3 per cent stamp duty surcharge on the purchase of buy to let properties introduced in April 2016 and the phasing out of buy to let mortgage interest tax relief.
According to FCC Paragon, the trend for an increase in sales of rental protection products has continued in 2018 thus far. This is as landlords look to mitigate risk amidst the increasingly uncertain climate of the buy to let sector.
The firm reported that 40 per cent more rent protection products were sold in January 2018 than during the same month last year. Rent protection products cover payments in the event that a tenant defaults on their rent. This enables landlords to continue to finance their buy to let mortgages.
Managing director of FCC Paragon, Bryn Cole, 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.’
He continued: ‘A perfect storm of continually rising rents and the prospect of further interest rate rises mean landlords want to be protected. The costs for landlords are higher than ever before and so understandably they want peace of mind that they are covered financially if something goes wrong. It seems to us that many landlords are of the mindset that spending now could save them significant amounts of money in the future. 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.’