Buy-to-let properties still a solid investment
With demand for homes to rent continuing to grow, a buy-to-let property is still a sound investment, according to industry insiders quoted in Landlord Today.
Buy-to-let investors have seen radical changes over recent years. A gradual reduction in mortgage tax relief and a stamp duty surcharge have resulted in press reports of landlords leaving the sector in droves.
However, Andrew Turner, chief executive at specialist buy-to-let mortgage broker Commercial Trust believes the impact has not been as great as anticipated. While some buy-to-let landlords have left the sector, many still believe that homes to rent are a good investment, according to Turner.
He said: “The simple fact is that buy-to-let remains a solid investment option, with strong potential for an attractive and profitable return on capital invested.
“Investors should not be deterred from buy-to-let. Demand for rental housing is stronger than ever, the cost of debt remains relatively cheap and the housing shortage is likely to continue. Even so, any investment decision requires care and expertise.”
Recent figures from banking trade association, UK Finance revealed a fall in forecasted buy-to-let activity in 2018, to £3 billion below expectations.
Jackie Bennett, director of mortgages at UK Finance said: “This is undoubtedly the impact of various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.” However, buy-to-let re-mortgaging exceeded forecasts for 2018, growing by around 15% at the same time as new mortgages fell by 12%.
Says Andrew Turner: “In early August 2018, the Bank of England decided to increase rates by 0.25%. Although there has been limited market reaction so far, I expect to see market rates increase, because margins are wafer thin.
“Landlords have responded to this and there has been significant interest in fixed rates, useful to guard against rate rises. Investors are likely to continue to do this as their renewal dates come up and, therefore, I’m sure the re-mortgage market for buy-to-let will remain buoyant over the coming months.”
Meanwhile, the message to buy-to-let borrowers, is to shop around when a fixed-rate mortgage deal ends. Analysis by another broker, Private Finance, reveals that borrowers on a standard variable rate loan could save £4,000 in mortgage interest over two years by switching to a fixed deal.
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