Surge in New Buy-to-Let Mortgages Expected for Q1 2016
While Buy-to-Let re-mortgages were the dominant feature of the 2015 UK mortgage market, the prediction for the opening three months of 2016 is that this is likely to be superseded by a wave of new buy-to-let mortgages.
As reported this month on Landlord Today, 2015 saw buy-to-let property owners re-mortgaging their portfolios, taking advantage of ultra-low interest rates in order to make significant savings and enabling them to recoup finances for future investment. Indeed, 2015 was a year in which home loans from buy-to-let investors soared, with a 35% increase year on year. And, while the majority of this increase can be attributed to re-mortgages, the early signs for 2016 suggest perhaps, that the trend may swing back to new mortgages; or, more specifically through the first quarter of the year.
Buy-to-Let Tax Changes in April
From April 1st 2016 buy-to-let landlords will be subject to a 3% stamp duty surcharge on their respective properties. With this change imminent, there is every likelihood to expect a bit of a surge in new property investment between now and then, before the changes kick in.
Indeed, as reported by David Whittaker, Managing Director of Mortgages for Business, in the Landlord Today article, not only is there an expectation of a rise in new applications for buy-to-let mortgages, but finance enquiries has already exceeded those from the same period a year ago.
This pre-tax change period may well entice existing buy-to-let investors seeking to increase their portfolio to do it now. Buying before the tax change will obviously enable them to increase their portfolio without paying the additional surcharge later in the year, and with mortgage rates still at particularly low levels, it certainly presents a window of opportunity for investors. As mortgage broker SPF’s Chief Executive Mark Harris noted on the BBC website, investors are looking to secure properties while there are “some of the cheapest buy-to-let rates ever”, before the new legislation comes about.
Moving from Personal Portfolios to Corporate
The increase in buy-to-let mortgaging may also stem from the fact that, with changes on the horizon, investors are altering the way in which they manage their portfolio to ensure that revenue isn’t adversely affected.
As we have looked at on this site previously, one such way that investors are altering their operation is through the setting up of limited companies, as opposed to a personal property portfolio. By migrating to a limited company set-up, investors are able to protect against the cuts to tax relief on mortgage interest which will also come into effect this year.
Indeed, as David Whittaker went on to add in Landlord Today, a particular area of new mortgage activity has certainly come from the corporate sphere with many landlords seeking to switch away from personally held assets. Adding to this, the Daily Mail reported that loans to corporate businesses for buy-to-let properties have doubled from 15 to 30 percent through the final quarter of 2015.
An indication, it would appear, of the direction the market is heading.
Opportunities for Investment Still Exist
These reports and figures certainly seem to back up the idea that investment in the UK buy-to-let market is alive and well as we move into 2016. Legislative changes may have prompted investors to re-think their strategies and more importantly their structures, but with continually low rates and banks opening up more opportunity for finance to limited companies, there remains a robust opportunity for investors to find sustainable growth in the current market.