Buy to Let

Buy-to-let rates continue to fall despite crackdown on landlords

Despite the Government crackdown on the buy-to-let market and the wave of new regulations hitting landlords, rates continue to fall.

According to moneyfacts.co.uk, average two-year fixed but-to-let rates have fallen from 3.22% to 2.91% in the past year.

Charlotte Nelson, finance expert at moneyfacts.co.uk, said: “The buy-to-let market has seen some turbulent times, with significant tax changes, tougher affordability rules and more changes to come into force in September. It is little wonder many thought the BTL mortgage market might show signs of strain. And yet, rates have continued on a downward path. Since the introduction of new regulation in January, however, the pace of the reductions has slowed considerably.”

Even though the pace of the fall has slowed in recent months, the market has now recovered from the significant drop in products seen at the start of this year.

Since January the number of buy-to-let products on the market has risen from 1,408 to 1,610.

“Product numbers have been bolstered since the dramatic fall that occurred in January, giving landlords looking for a mortgage deal today more choice,” said Nelson.

“This shows that after the initial shock of the changes in January, providers are keen to recover and keep the market buoyant.”

According to new Prudential Regulation Authority rules, portfolio landlords with four or more rental properties will be subject to stricter checks on income and debt from 30 September.

Nelson said: “Providers are now starting to gear up for further regulatory changes. From 30 September, lenders will have to apply stricter standards for landlords with four or more properties. Given that 89% of the mortgage deals on the market today are available for borrowers with four or more properties in their portfolio, these changes will affect a large chunk of the market.

“Faced with these changes, it is likely that competition among providers may start to ebb initially, with the providers instead focusing on their core range and getting their criteria up to date. With the added uncertainty in the economy, landlords looking for a mortgage deal are likely to face a bumpy road for a while. Anyone unsure of their options should seek out independent financial advice.”

Last year, the Government increased stamp duty on second homes by 3% to help free up property for first-time buyers.

Mortgage interest relief for residential buy-to-let properties was reduced to the base income tax rate – which is 20% – in April. Landlords were previously able to claim tax relief on the top rate of tax of up to 45%.

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