Despite the stamp-duty increase and looming tax relief cuts, buy-to-let mortgage providers are still following the prevailing market trend and slashing rates.
Since last year, the average two-year fixed-rate buy-to-let mortgage has dropped from 3.59pc to 3.32pc, while the average five-year rate has dropped from 4.37pc to 4pc, according to Moneyfacts.
Over five years, two year fixed-rates are down from 5.21pc while five year fixed-rates are down from 6.24pc.
Peter Gettins, product manager at mortgage broker London and Country, explained : “Over the last few months, certainly before the stamp duty change came in, there was a definitely the consideration that there’s a bit of an opportunity to be had, so that increased competition will have pushed lenders to cut rates."
Mr Gettins said the continued rate cutting isn’t surprising: “There is still a lot of appetite for buy-to-let from lenders, it still represents in most cases very good risk lending.”
There are two main parts to the Government’s attempt to take on buy-to-let landlords. The first comes in the form of an additional stamp duty surcharge, with an extra 3pc due on the entire value of any second or additional property.
The second is a tax relief cut, phased in over five years, which will leave landlords unable to claim tax relief on mortgage payments. Instead, they will be taxed on their total rental income, severely cutting into profits.
The lettings market was flooded with properties in the run-up to the April 1 deadline to avoid the additional stamp duty surcharge, but it remains to be seen whether the tax relief changes will affect landlords appetite for additional property investments.
According to Countrywide, the estate agency, 50pc of homes sold in the last two weeks of March were bought by landlords.
Mr. Gettins said that everyone is “acutely aware” that landlords costs will go up due to the cuts to taxation relief.
“Really the best way landlords can look to mitigate that impact is to reduce their outgoings, so there is plenty of pressure to push rates down and plenty of competition still left in the market.”
Charlotte Nelson, finance expert at Moneyfacts, said: “While the current pressures on the market are not yet causing rates to rise, borrowers should remember that they will now be facing tighter lending rules, including stricter affordability checks, so it is even more important for potential landlords to seek financial advice to see if buy-to-let really is the right option for them.”
Reference: http://www.telegraph.co.uk/personal-banking/mortgages/buy-to-let-mortgage-rates-are-being-slashed-despite-war-on-landl/