What Will 2017 Hold for Landlords?
3 minute read
2016 was undoubtedly a challenging year for landlords. After enjoying more than a decade of rising rents, bumper yields and attractive market conditions, 2016 was the year the government decided to put the brakes on the buy-to-let market. The now ex-Chancellor George Osborne managed to make himself unpopular with existing and prospective landlords in last year’s budget by introducing an additional 3% surcharge on the purchase of second homes. This led to a surge in house purchases in March, as landlords rushed to push through sales before the new rules came in. There were also new affordability checks announced, which oblige lenders to tighten their affordability calculations when considering applications for buy-to-let mortgages. This is the result of the removal of mortgage interest tax relief for higher rate taxpayers, which will impact on the affordability of some mortgages. So if 2016 was an ‘annus horribilis’ for buy-to-let landlords, what does 2017 have in store?
The Increased Use of Limited Companies
One of the big trends we expect to see in 2017 is the increasing move towards incorporation, as landlords use limited companies to look to take some of the sting out of 2016’s changes. A recent property investor survey found that 32% of respondents currently own at least one property in a limited company, up 2% on May 2016. When asked whether future purchases would be made using a limited company, 54% said they would choose the incorporated route, while 16% planned to use a combination of limited company and personal ownership.
Landlords Feel the Effect of Recent Changes
Sixty percent of landlords believe they will be affected by the mortgage interest tax relief changes and the stricter mortgage affordability checks in 2017. Twenty-nine percent said they did not expect to be impacted, with those respondents likely to be a mix of lower rate income taxpayers and landlords operating their portfolios through limited companies.
Will Landlords Still Hope to Buy?
Perhaps surprisingly given the disadvantageous changes in 2016, 45% of the landlords surveyed are looking to expand their property portfolios over the next year – up from 41% in May 2016. This suggests strategies can be adapted and healthy profits can still be made in the property investment market.
Buy-to-Let Mortgages in 2017
In terms of buy-to-let mortgages, the most popular mortgage on the market at the moment for those buying personally and through limited companies is a fixed rate deal. Thirty-four percent of landlords currently prefer this type of loan, while 19% of investors would opt for a variable rate. This preference for longer-term fixed deals is thought to be the result of the added uncertainty landlords currently face given the recent changes, in addition to the slightly more relaxed rent to interest ratios required by lenders when this type of mortgage is arranged. There is also the prospect of interest rate rises and growing inflation in 2017, which is convincing landlords to lock in the ultra-low rates while they can. Looking for a buy-to-let mortgage or a limited company buy-to-let deal in 2017? We can help you find the best mortgage deal, on and off the high street, so please get in touch with our expert mortgage advisers to discuss your individual needs.