Government backs fresh wave of Right to Buy

The increased discount under the Right to Buy scheme for social housing tenants was announced in the Government’s Autumn Statement.

Many ex-local authority properties make excellent buy-to-let investments because they are purpose-built with evenly sized rooms that suit sharers, and are often well located.

Social housing tenants in London could benefit from the change by:

• Exercising their Right to Buy at the new discount and then letting their property on the private rental market.
• Exercising their Right to Buy and then selling the property to a buy-to-let investor.

Restrictions under the Right to Buy scheme mean that social tenants who take advantage of the scheme have to refund the discount if they sell their property within five years.  The amount they have to repay depends on how long they hold the property for.

Under the current rules:

• Selling in the first year means the full discount must be repaid
• 80% of the discount must be repaid if the property is sold in the second year
• 60% of the discount must be repaid if the property is sold in the third year
• 40% of the discount must be repaid if the property is sold in the fourth year
• 20% of the discount must be repaid if the property is sold in the fifth year

Stephen Ludlow, Chairman of ludlowthompson, comments: “This will be very attractive for social housing tenants who were thinking of moving away from London.  They can now exercise the Right to Buy, benefiting from a much higher discount and then let the property to fund their housing costs outside of London.

“After five years has expired, they can then choose to sell the property if they prefer.

“More Right to Buy is good for current buy-to-let investors too.  It means that more people move from social housing to the private rental sector, increasing the overall number of renters in London.”

Mortgage availability for buy-to-let investors remains strong, as demonstrated by the most popular mortgages from ludlowthompson Mortgages:

• 80% max loan to value, with a fixed interest rate of 5.99%, and an overall cost for comparison at 6.6% APR
• 80% max loan to value, with a fixed interest rate of 5.6%, and an overall cost for comparison at 2.5% APR
• 80% max loan to value, with a discounted tracker interest rate of 4.99%, and an overall cost for comparison at 5.7% APR
• 75% max loan to value, with a fixed interest rate of 4.39%, and an overall cost for comparison at 4.9% APR
• 75% max loan to value, with a fixed interest rate of 5.35%, and an overall cost for comparison at 5.6% APR