Despite planned changes to landlord tax relief, the demand that made buy-to-let attractive in the first place remains
The Chancellor’s announcement in his summer Budget that mortgage interest tax relief is to be dropped has led some to question the attractiveness of investing in buy-to-let.
Changes will be phased in over a four-year period from 2017 and some believe that hundreds of thousands of property investors could be hit. Losses for landlords could accelerate even further if interest costs rise.
In our view, however, it is too early to write off this sector completely. Now may be a good time to revisit or establish a relationship with a local accountant who can help you to explain these changes to landlord clients. This may provide a good source of referrals for other mortgage opportunities as well. Despite the changes, it is important to remember that the demand for rental properties that made buy-to-let attractive in the first place remains.
In fact, recent research by PwC suggests that a quarter of homes over the next five years will be rented out. All in all, this creates the prospects for rental income to remain high. There are many forms of buy-to-let products on the market so it is worth speaking to your business development managers at lenders to understand the alternatives. One example is the limited company buy-to-let, which could become an option for landlords affected by the tax changes.
Fleet Mortgages, Kent Reliance and Paragon are among the lenders that already offer limited company buy-to-let products but we are hearing noises to indicate that some building societies are looking to enter this space.
The buy-to-let sector as a whole is too important to lenders to collapse completely so we expect to see many innovative products launched in this space over the next couple of years.
Robert McCoy is senior product & communications manager at Sesame Bankhall Group
