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Why location is critical for the HMO market

Grant Hendry, director of sales at Foundation Home Loans, explores how HMO licensing, stock availability and cost varies from region to region and why a number of great HMO opportunities remain available to landlords in the current market.

The modern mortgage market is awash with complexity from a borrower, intermediary and lending standpoint. This is further exacerbated by additional financial pressures being felt by households across the UK – both owner occupied and rental – and some lingering uncertainty over the impact of recent events on interest rates and house prices.

Inevitably, increased living costs are leading to some people having reconsider their immediate homeownership aspirations and the demands of their current accommodation. For landlords, many have gone back to basics in terms of delving deeper into their yield, void and cost calculations. When it comes to yield, houses in multiple occupation (HMOs) have historically topped these charts and proved an attractive option for the more hands-on landlords who have the knowledge and experience to manage differing tenant and property demands.

This yield equation was evident in the most recent BVA BDRC Landlord Panel research for Q4 2022 which outlined that HMO properties went back to the top spot of the rental yield table. These were reported to be offering the strongest yield by property type, at 6.4% for the quarter, followed by multi-unit blocks at 6.2%.

Furthermore, the research also suggests that the proportion of gross rental income spent on maintenance and running costs of HMOs hit a low in Q4 at 26% from the high of 29% experienced in both Q1 and Q3. For the full picture, the proportion of gross rental income spent on maintenance and running costs of HMOs was recorded at 28% in Q2 2022 and 24% in Q4 2021.

Demand remains strong amongst landlords and tenants, meaning that this remains an area of lending in which we at Foundation Home Loans continue to see strong levels of business. Although, there are also an argument to be made that this is more down to our approach – we are one of only a few lenders which don’t load ICRs on such property types – rather than currently being the industry norm.

To find out more about how we can assist you with your HMO Mortgage please click here

With such strong yields, albeit with additional costs actuated, this means that the HMO market is flourishing right? Right?

It seems that location is critical for this particular market.

As outlined in recent market analysis by Sirius Property Finance, while a raft of regulations have led to increased tenant welfare, these have also contributed to a decline in HMO numbers.
Taking a trip back in time for a moment, October 2018 saw the UK government extend the mandatory licensing of HMOs to cover the vast majority of properties containing five or more people from two or more separate households. Previously, only properties with three or more storeys containing five or more people from two or more households required an HMO licence.

There can be no argument that improving the safety and living standards for tenants is a huge step in the right direction. However, this has also placed increased pressure on landlords with some opting to offload their HMO properties rather than dealing with the added costs.

As highlighted in the aforementioned Sirius analysis, this has led to the overall number of HMOs falling by -2.4% in the past year, but this drop is dwarfed by some incredible regional declines. The East Midlands was suggested to have recorded an annual HMO stock decline of -26.1%, the North East has seen HMO stock levels drop by 15.8%, while in the South East numbers are down -6.7%. However, these falls are not universal across all regions. Indeed, the likes of the West Midlands (16.9%) and Yorkshire & Humber (11.2%) recorded impressive annual stock growth over the past year.

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These figures demonstrate how HMO licensing, stock availability and cost varies from region to region and, as with any property investment, it’s vital that landlords do their due diligence before entering into this arena. However, a number of great HMO opportunities do remain available for those landlords who are looking to maximise yields and capitalise on rising levels of tenant demand.

There are also plenty of attractive options from an HMO product perspective. Especially from those lenders who are highly experienced in this type of lending, who are finely attuned to the needs of such landlords and have the underwriting capabilities to match their ever-changing needs.


Source: Financial Reporter

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Truss to announce stamp duty cut – report

UK housebuilders rallied on Wednesday following a report that Friday’s mini-budget could include a plan to cut stamp duty.

According to The Times, prime minister Liz Truss will announce the move in the mini-budget in an attempt to drive economic growth. It was understood the PM and chancellor Kwasi Kwarteng have been working on the plans for more than a month.

Truss believes that cutting stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder, The Times said.

It cited two Whitehall sources as saying that cuts to stamp duty were the “rabbit” in the mini-budget, which the government is billing as a “growth plan”.

Under the current system, no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000 stamp duty is levied at 2%, £250,001 and £925,000 at 5%, £925,001 and £1.5m at 10% and anything above £1.5m at 12%. For first-time buyers the threshold at which stamp duty is paid is £300,000.

During the pandemic, then chancellor Rishi Sunak lifted the stamp duty threshold to £500,000.

At 0910 BST, Persimmon shares were up 5.4%, while Taylor Wimpey and Barratt were up 4% and Berkeley was 3.5% firmer. On the FTSE 250, Redrow was 5.6% higher, while Bellway and Crest Nicholson were up 3.6% and 3.4%, respectively.

Tom Bill, head of UK residential research at Knight Frank, said: “Nobody can accuse the new government of lacking an economic vision. If its low-tax approach extends to stamp duty, recent history tells us it will trigger higher levels of demand in the housing market at a time when mortgages are getting more expensive, which will support social mobility.

To find out more about how we can assist you with your HMO Mortgage please click here

“Prices could move higher in the short term if supply initially struggles to keep up but more balanced conditions will return provided the cut is immediate and permanent.”

Neil Wilson, chief market analyst at, referred to the potential stamp duty cut as “the old Tory trick of juicing the housing market in its heartlands to boost confidence (wealth effect) whilst doing not a lot for housing supply”.

“I’m not for concreting over the green belt at all, but there will be questions about the economic soundness of this policy, as there always is. However, with interest rates rising so quickly, an offset to the cost of buying a home would grease the wheels of the market -without higher rates could cause the housing market to seize up.”

He added: “Clearly a stamp duty cut is good news for housebuilders who can expect higher selling prices as a result.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, argued that a stamp duty cut could do more harm than good.

“Buyers are unlikely to be unhappy at the prospect of a tax cut, but if the government chooses to cut Stamp Duty in an effort to stimulate the housing market, there’s a risk it could do more harm than good.

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“It’s easy to see why the government is concerned about the housing market. We’ve seen demand fall consistently since May, when rocketing bills, rising house prices and ever-increasing interest rates started to take a toll on buyer enthusiasm. There’s a risk that if rate rises accelerate, pressure on buyers could reach a tipping point, where demand dries up.

“We know from very recent experience that a Stamp Duty holiday can stimulate demand. However, the only reason these holidays work is because people feel they have a small window of opportunity to take advantage, otherwise they’ll miss out. The point at which they think they can just wait for the next one, they will start to become less effective.

“Even if it does stimulate demand, it overlooks the fact that the real brake on the property market is a severe shortage of supply. With an average of 36 properties on each agent’s books, we’re still close to an all-time low in the availability of property for sale. Driving demand without addressing supply would risk more buyers chasing a tiny number of properties, which would push prices up.

“By ramping up prices at a time of rising mortgage rates, the end result would be higher monthly mortgage costs, which would be increasingly unaffordable. And the Stamp Duty holiday wouldn’t help on this front. This in itself could be enough to put buyers off, and if it deters enough of them, it could end up having the opposite impact to the one that’s intended.”

By Michele Maatouk

Source: Sharecast

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New crackdown approved to tackle substandard HMOs in Dudley

A new crackdown on substandard HMOs has been approved in Dudley to stop rogue landlords who cram tenants into overcrowded homes.

Councillors say they need to “make sure that new homes in Dudley Borough meet a certain standard of quality for the good of the people who live in them”.

Developers looking to turn a property into an HMO (house in multiple occupation) for up to six people will now have to apply to Dudley Council for planning permission under the new ‘Article 4 Direction’ passed this week.

While HMOs help to meet a specific housing need, especially for those on a low income, there are concerns that high concentrations in certain areas are harming their character, putting pressure on infrastructure and diminishing community relations.

It is claimed the main issues with HMOs revolve around anti-social behaviour, noise, inadequate living conditions, litter and parking issues.

To find out more about how we can assist you with your HMO Mortgage please click here

Evidence provided by West Midlands Police and the council’s anti-social behaviour team found a correlation between HMOs and increased crime and drug offence levels.

The ‘Article 4 Direction’ has now been rubber-stamped after a six-week consultation period. Councillors say the new legislation will allow the council to keep tabs on the standards of homes across the borough.

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Councillor Simon Phipps, cabinet member for regeneration and enterprise, said: “We need to make sure that new homes in Dudley Borough meet a certain standard of quality for the good of the people who live in them and other residents in the local area.

“It’s clear from the evidence gathered that the unchecked creation of small HMOs using permitted development rights undermines our ability to properly plan developments in our neighbourhoods.

“Our plan will create consistency in the planning system so all HMOs must go through the scrutiny of a planning application before they are created. But we won’t just stop at this measure, because the emerging Black Country Plan will also introduce new policies to make sure new homes are better quality and do not detract from the wider local area.”

By Josh Horritt

Source: Express & Star

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HMO Property Investment Services in the UK: What You Need to Know

If you’re looking for information on HMO property investment services in the UK, you’ve come to the right place. In this blog post, we’ll discuss what HMO investment services are, and how they can help you achieve your financial goals. We’ll also provide a list of resources where you can learn more about HMO investing and find professionals who can help you get started.

What is a HMO investment?

A HMO investment is a type of property investment that allows you to purchase multiple properties under one roof. This type of investment can be beneficial for both investors and tenants, as it provides a way to reduce costs and increase profits. When done correctly, investing in a HMO can provide a steady stream of income and long-term capital growth.

Is HMO a good investment?

HMO property investments can be an excellent way to generate income and grow your wealth over time. However, there are some risks associated with this type of investment, so it’s important to do your research before getting started. If you’re ready to learn more about HMO investing, we recommend checking out the resources below.

What is a good ROI for HMO?

There is no definitive answer when it comes to what a good ROI for HMOs is, as it will vary depending on a number of factors. However, many investors aim for a minimum return of 15% per year. To learn more about how to achieve this, we recommend speaking with a professional HMO investment advisor.

To find out more about how we can assist you with your HMO Mortgage please click here

Where can I find HMO investment properties?

There are a number of ways to find HMO investment properties, including online listings, estate agents, and word-of-mouth. We recommend speaking with a professional HMO investment advisor in the area you want to purchase in to learn more about the best way to find properties that fit your needs.

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Things to consider when buying a HMO

HMOs, like any other financial investment, have advantages and disadvantages. It’s important to evaluate these factors and decide whether it’s the right option for you.


  • Strong rental yield when compared with buy-to-let
  • Lower risk of rental voids
  • As the rent is shared among several tenants, the impact of overdue payments is reduced.
  • If the location is right, tenant demand for low-cost housing is high.


  • Managing the property can be more difficult
  • Start-up costs can be higher if conversion is needed
  • Running costs can be higher
  • Arranging HMO finance can be tougher
  • What are regulations of HMOs?

HMOs must adhere to stricter rules and standards than Buy-to-Lets in general, especially when it comes to fire safety and planning permission. As a result, you’ll also find that the fines for non-compliance are greater. Speak to a good estate agent who specialises in HMO like Mistoria Group who are HMO experts and have helped many landlords successfully let these properties across the UK.


Source: News Anyway