Buy-to-let lenders sweeten deals as land­lord tax changes hit de­mand

The Daily Telegraph - Your Money - - MONEY - Sam Barker

Buy-to-let land­lords are ben­e­fit­ing from low mort­gage rates as lenders at­tempt to keep them in­ter­ested. The av­er­age in­ter­est rate for a buyto-let mort­gage fixed for two years is 2.91pc, ac­cord­ing to Money­facts, a data ser­vice. It was 2.94pc in Jan­u­ary.

For five-year fixed deals the cur­rent av­er­age is 3.45pc, the same as in Jan­u­ary.

The cur­rent av­er­age rates are not quite the low­est this year. The records are 2.88pc for a two-year deal and 3.43pc for five years, both in June.

But since then the Bank of Eng­land has raised the of­fi­cial cost of bor­row­ing by a quar­ter of a per­cent­age point. Rather than pass this in­crease on, the fig­ures show that lenders have swal­lowed the cost to re­main as com­pet­i­tive as pos­si­ble.

Chris Sykes, of mort­gage bro­ker Pri­vate Fi­nance, said lenders knew that land­lords were be­ing dis­cour­aged by the stamp duty sur­charge on sec­ond homes and were slowly los­ing the abil­ity to off­set mort­gage in­ter­est against prof­its.

He said: “In a bid to gal­vanise the mar­ket, lenders are mod­i­fy­ing prod­ucts to make them a more at­trac­tive deal to bor­row­ers.”

TSB re­cently cut rates by up to 0.3 per­cent­age points across its buy-to­let range.

Jonathan Clark, of mort­gage bro­ker Chad­ney Bulgin, said lenders were also keen to do more buy-to-let deals as rates were typ­i­cally higher than on res­i­den­tial mort­gages.

Lenders are of­fer­ing other ways to sweeten these deals, too. Mr Clark said: “Re­cent buy-to-let pur­chase num­bers are down as a re­sult of the higher rate of stamp duty now levied on land­lords, as well as the harsher tax treat­ment, so many lenders are look­ing to tempt cus­tomers away from their ex­ist­ing lenders by of­fer­ing to meet the le­gal and sur­vey costs usu­ally as­so­ci­ated with such a trans­ac­tion, mean­ing land­lords could have very lit­tle or, in some cases, no switch­ing costs.”

Low rates will not last for­ever. Rachel Springall of Money­facts said: “It is largely ex­pected that in­ter­est rates will rise in the near fu­ture. This could also af­fect the value of prop­er­ties on the mar­ket.”

Si­mon Cox, of es­tate agent Your Move, agreed that buy-to-let rates were cur­rently very low.

But he said land­lords should also con­sider fol­low- on rates, which could be higher, and also how their taxes might be af­fected.

Mr Cox said: “Look­ing at rates in iso­la­tion is prob­a­bly not the right way to jump into the mar­ket.”

Prop­erty in­vestors have been hit by ex­tra stamp duty and tighter rules on tax relief

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