Buy To Let – The Future
The UK buy to let market has expanded with more professional and accidental landlords active than ever before.
However, with changes to how buy to let mortgage interest is set-off against tax and the increase in stamp duty on new buy to let purchases then the market is starting to change. If you add in the mortgage credit directive driving tighter affordability tests then you would expect to see the market contract.
But what is going to happen?
Buy To Let Barometer Survey
A survey conducted by Shawbrook Bank looked at the attitude of existing landlords as to what their intentions were for 2016;
- 54% expected to increase their buy to let portfolio size by making further purchases
- 61% expected to see an increase in their income from their portfolio
- Only 6% expected to see their portfolio income fall
The outlook is more positive than might have been expected, however things are not going to continue as normal.
Limited Company Buy To Lets
The changes in tax and interest rules are not necessarily slowing down the ambition of landlords but they are changing how purchases are being made.
It is expected that 40% of new buy to let purchases will be made in a limited company name. This means that landlords can benefit from paying corporation tax rates rather than personal income tax rates.
Limited Company Mortgages
Where things change is with the buy to let lenders. Many of these lenders remain keen to do the mortgages but will only look at personal purchases. Buying in a limited company name could mean using different lenders and asking something different from your mortgage broker.
It may all look the same, but for a lender using a limited company can fundamentally change how they view the proposal. If the shift toward limited company lending continues then it will require existing lenders to get new authorisations from the FCA, train staff and amend underwriting.
All in all, it may be that some buy to let lenders are not prepared for the next generation of landlords.
If you have any comments about this post then please get in touch.
By Dave Farmer