Buy-to-Let Mortgages Reach New High

Buy-to-Let Mortgages Reach New High

Clock  3 minute read

Carl Shave Carl Shave | March 11, 2016


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Lending to buy-to-let investors has climbed to its highest level since 2007, with landlords rushing to beat the impending stamp duty changes being introduced in April of this year. The Mortgage Lenders and Administrators report released jointly by the Bank of England and the Financial Conduct Authority revealed that £10billion was handed out for buy-to-let properties in the final quarter of 2015, up from £7.7billion a year earlier.

Stamp Duty Changes

This is without doubt linked to the impending stamp duty changes set to be introduced to the market. Chancellor, George Osborne, announced in his Autumn Statement last year that an additional 3% of stamp duty would be payable on buy-to-let properties and second homes (with some exemptions). To illustrate, a buy-to-let property worth between £250,000 and £500,000 would be subject to stamp duty at its highest level of 8% rather than 5%. On a property worth £275,000, it would work out at £12,000 based on the payment thresholds. The calculation would be 3% of £125,000 plus 5% of £125,000 plus 8% of £25,000. This reflects a 200% rise from the previous figure of £3,750. With such a significant rise being introduced, it is clear to see why there has been such movement in the buy-to-let market. The changes have been introduced to slow down what has been a booming buy-to-let market, which has threatened to damage our economic recovery.

How Long Will the Trend Last?

Industry commentators expect this trend to abate in the coming months, as stamp duty changes make buy-to-let a less attractive option as a short-term money-maker. The buy-to-let market will likely see a shift in intent and action, with properties of a lesser value possibly offering a better investment than larger properties. Should the buy-to-let market suffer in the short term, we would expect it to pick up once the initial blow has been absorbed. With the Chancellor’s notice of intent in his Autumn Statement to increase stamp duty in April, it has been no great surprise to see such a spike in activity with potential buyers looking to get their purchases through before the deadline. Informed investors have acted accordingly and will look to save a pretty penny in the process, however, many potential buyers are still not aware that this change could result in much higher costs. Clients who are interested in retaining their current home as an investment and buying another as their new residence seem unaware that this new stamp duty increase also affects them. Soon the dust will settle and the new stamp duty rates will be another factor for any potential property investor to take into consideration. It is hoped, however, that the new rules will be clearly defined to ensure unsuspecting investors are not simply charged more due to circumstance. For many, making the right financial decisions isn’t always as straightforward as following a flow chart. If you would like to discuss buy-to-let properties and changes to stamp duty, please get in touch with the Just Mortgage Brokers team today. You can call us on 0800 114 3996 or use our contact form. Image source