Buy to Let Mortgage Rates are Being Slashed. Is it Good News?

April 14, 2016

With buy-to-let mortgage rates lowered and not likely to rise at any time soon, is now the perfect time to be a landlord?

Despite increases in Stamp Duty tax, lenders are still slashing the rates of buy-to-let mortgages. The average two year fixed-rate buy-to-let mortgage has dropped from 3.59pc to 3.32pc. This is believed by some to be due to the fact that the pending increase in Stamp Duty tax caused investors to rush to pick up a buy-to-let deal, resulting in lenders cutting their rates. Buy-to-let mortgages in general represent very good risk lending and banks are keen to dish them out. This is obviously great news for would be landlords, but the road ahead isn’t completely clear, just yet.

Indeed, the government have still attempted to clamp down through an additional stamp duty surcharge with an extra 3pc due on the entire value of any second or additional property. They are also phasing out landlords abilities to claim tax relief on mortgage payments. Instead, they will be taxed on their total rental income, this sadly will eat into the overall profits, landlords could previously have expected to earn.

Despite these efforts from the government to clamp down, 50% of property purchases in March 2016 were from landlords. This is despite their being an overall awareness of the inevitable mounting costs of being a landlord due to cuts to tax relief.

Even though rates aren’t on the rise, landlords must remember that they are now facing tighter lending rules, including stricter affordability checks.

As of 2020, landlords won’t be allowed to take the cost of their mortgage interest from their rental income to establish the tax they owe. Tax will be paid on turnover rather than profit.
For higher-rate taxpayers, mortgage costs above 75% of rental income will mean that they are making a loss on their buy-to-let mortgage.

Despite all these new restrictions, investing in property and renting it out it is still a smart move. Here at Waltham Estates we offer a comprehensive property management service. We provide maintenance on your property, through our professional network of tradesmen when needed and we also offer a guaranteed rent scheme. Call us today for more info on: 020 8509 0444

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