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Friday, January 08, 2016

The BTL mortgage market in 2016

What’s in store for 2016?

Jane Simpson at Property Hawk Mortgages says:

2015 was a successful year for the buy-to-let mortgage market. There has been a marked improvement in the marketplace with new lenders entering and a significant increase in the number of products for landlord clients to choose from. This has resulted in increased competition and better rates.

However, it hasn’t all been such encouraging news as the Government announced two new levies affecting buy-to-let investors. The first blow to landlords is the reduction in the level of tax relief available to them being phased in from 2017. Under the new scheme landlords will no longer be able to deduct mortgage interest from their rental income before calculating how much tax they owe, but will instead get a tax credit equivalent to 20 per cent basic tax rate on the amount. This could significantly impact the profits that landlords make on their buy-to-let investments and some could even end up operating at a loss.

However, these tax changes do not affect limited companies, so 2016 could see a rise in the number of landlords looking to hold their properties in a Special Purpose Vehicle. At Property Hawk Mortgages we have started to get an increasing number of enquiries about limited company mortgages and there has already been a reaction by lenders to the growth in demand with many more products now available in this area.

The second blow to landlords is the additional 3 per cent stamp duty on buy-to-let properties which will come into effect in April 2016. This new buy-to-let surcharge will certainly make prospective landlords think hard before investing in rental property, especially amateur landlords who are considering just one or two buy-to-let investments as a supplement to their pension plans. The returns may not be attractive enough anymore.

As a result of this change to stamp duty, it is expected that there could be a flurry of buy-to-let purchases during the first quarter of 2016 as landlords look to secure new properties before the increased charge comes into play. Landlords looking to make buy-to-let purchases in the early part of 2016 should be aware of the impending changes and make sure to get their applications in earlier enough so that they complete before April.

Interestingly, Property Hawk Mortgages has recently launched a bridge-to-let scheme with Aldermore. Aldermore provides a flexible approach to short-term lending, offering straightforward bridging finance including an exit route onto one of their standard buy-to-let mortgages. The scheme is ideal for buy-to-let auction purchases, properties not suitable for mortgage purposes or those in need of refurbishment or renovation.

We may find that this scheme also proves popular for new buy-to-let purchases as April approaches. The cost of taking out a bridging loan for a short period is likely to be less than the 3 per cent increase in stamp duty.

Generally speaking, I am expecting 2016 to be another good year for buy-to-let with healthy competition between lenders and a large number of products in the marketplace. There could well be new providers joining the sector and we may see more offering mortgages for specialist areas of buy-to-let lending such as for HMOs, limited companies and student lets.

Tel: 029 2069 5446
Your home may be repossessed if you do not keep up repayments on your mortgages.  

The Financial Services Authority does not regulate some forms of mortgage.


Anonymous said...

There will be no flurry of purchases. The market is going to die, for small private investors.

Anonymous said...

^what they said! Tory scum attack the low and middle income earners, along with small and medium businesses!