Buy to Let Mortgages. It's not all Doom and Gloom

Buy to Let Mortgages – Reasons for Optimism in 2017

If you are an existing buy to let mortgage holder, or are planning to enter the market, you could be forgiven for thinking that the buy to let mortgage market isn't what irt was. This is largely because of a number of recent tax changes that, on the face of it, have made it harder to look at the Buy to Let Mortgage market with confidence in the future.

Here at Senate Money, where we specialise in brokering Buy to Let Mortgages for our clients, we believe that with the right approach and attitude to risk, Buy to Let can still be a very good investment. Above all, it’s important to know what has happened and is likely to happen in the market. This article looks at 3 key reasons why Buy To Let can still be a good investment.

Buy To Let mortgage rates are predicted to fall in 2017

There is a broad consensus that Buy to Let Mortgages, especially for the smaller, private landlords with 3 or fewer properties, are likely to fall in 2017. This is due to the new tax and regulation changes that came in 1st January 2017, which could lead to a rate war to attract this type of investor, who are normally considered to be lower risk with more equity.

By the same token, it is also considered that rates might well rise for larger ‘professional’ landlords with portfolios of more than 3 buy to let properties.

Only time will tell, of course, but with many buy to let mortgages only being available through brokers/intermediaries, it makes sense to talk to an independent broker like Senate Money. We have access to the whole of the buy to let mortgage market, and guarantee to find you the best deal for your circumstances.

What about the new Buy to Let Stress testing Rules?

January 1st saw the implementation of the new Buy To Let mortgage stress testing rules by the Prudential Regulation Authority. This has seen many lenders raise their required income coverage ratio from 125% rental cover to 145%, and apply a 5.5% interest rate stress test. The purpose of the legislation is to help ensure that borrowers can repay their mortgages if interest rates increase.

Inevitably, this legislation has worried many investors, but we make two points.

  • Firstly, as noted above, this very change is considered likely to result in a fall in interest rates, especially offered to the smaller investor who has a good amount of equity to invest. Under these circumstances, it is possible that concerns about the new stress test regime could be offset to some degree by the prospect of lower interest rates. If this is the case, then you need a broker who knows the market and get you the best possible deal.
  • Secondly, limited companies are largely unaffected by this new legislation. This is because the new tax legislation and lending criteria only apply to individuals, partnerships and LLPs. The treatment of tax for investment properties held in limited companies remains unaffected. In all cases Senate Money would recommend that advice from an accountant or tax specialist is sought before committing to a new buy to let mortgage. However, this fact has not been widely reported in the press.

An increasing number of BTL landlords are looking to overcome recent tax changes by transferring existing properties and acquiring new BTL property through a limited company.

Given the point above about Limited Companies being largely unaffected by the new tax legislation, it is perhaps not surprising that Senate Money has had a number of clients referred to them, who having had advice from an accountant or tax specialist, are looking to refinance whole buy to let portfolios as part of a strategy of transferring their business into a limited company. 

As ever, we always recommend full and detailed advice is sought from an accountant or tax specialist. However, this point does demonstrate how the market is coming up ways of coping with and accommodating the new tax rules for Buy to Let mortgages.

Contact us for help with Buy to Let Mortgages

Behind the headlines it is clear to us that Buy to Let is still a market worth looking at. Yes, it is much more heavily regulated, but with the depth of knowledge of the market that we have here at Senate Money, along with our understanding of lenders’ criteria and the tax issues involved, we are confident we can help find you or your client the best possible deal.

Call us on 01675 443878 or contact us for an initial chat.