As of April 2016, stamp duty land tax on buy-to-let (BTL) and second home properties rose by 3%, which saw a rush of existing and potential landlords trying to push through their application before the deadline.
But despite the changes, BTL has stayed strong as the rental market continues to grow. Lender competition and low rates has also pushed some BTL mortgage costs down, which is good news for those that are preparing themselves for further changes in 2017. Is it still a good time for landlords?
Although some experts are concerned that the BTL market will be hit hard through regulation and tax changes, analysis from Mortgage Brain has revealed that buy-to-let mortgage rates have continued on a downward trend over the past six months.
This drop in costs may have been the result of a decrease in Bank of England base rate, as many lenders compete for business. Meanwhile, the Bank of England predicts the potential of even further cuts to the base rate, which would mean that lender rates could drop even further. So what’s next for BTL?
One of the upcoming changes facing the BTL sector is next year’s changes in tax relief, due to begin in April 2017 and continue through to 2020. This phased change will see the rate at which landlords claim tax relief against their mortgage payments drop from 45% to a maximum 20%. Relief will be given as a reduction in tax liability instead of a reduction to taxable rental income.
Although seen as a currently unpredictable market, some experts see competitive BTL lender rates as a sign of confidence in the sector. Rates could always climb in the future, but there are many that expect further cuts before any rises in interest rates by the Bank of England.
But the Council of Mortgage Lenders predict that it will be the continued tightening of criteria and affordability testing at higher interest cover ratios and stress rates, which could have the biggest impact on the sector.
BTL has been an important factor in mortgage lending growth in recent years, but the sector faces a interesting time in the near future. Currently, low mortgage costs and competitive lender rates mean that now could still be an opportune time to discuss BTL, so contact us to arrange a chat.
Some forms of buy to let mortgages are not regulated by the Financial Conduct Authority.