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Buy-to-let market unfazed by stamp duty changes

Buy-to-let market unfazed by stamp duty changes

Category: Buy To Let

Updated: 02/02/2016
First Published: 02/02/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Yesterday saw the close of the Treasury's consultation on higher rates of stamp duty on additional properties, with a potential 3% levy being applied to purchases of buy-to-lets and second homes from April this year. However, this doesn't appear to have had a negative impact on the mortgage market, as our latest figures show…

BTL rates still falling

The data shows that, despite all the talk surrounding the sector and the potential ill effects that a stamp duty hike could bring, buy-to-let (BTL) mortgage rates are actually continuing to drop. At the same time, the number of BTL mortgages available is increasing, which means landlords can benefit from the ideal combination of product availability and historically low rates.

The table below shows the changes in more detail, and as you can see, the improvement is clear:

Feb-12 Feb-13 Feb-14 Feb-15 Today
Average Two-Year Fixed Rate (BTL) 4.92% 4.60% 4.10% 3.50% 3.25%
Average Five-Year Fixed Rate (BTL) 5.57% 4.87% 4.67% 4.39% 4.09%
Number of BTL Products 486 459 547 823 1,292

But just why are rates falling so considerably? Well, analysis suggests that much of it could be due to the increase in demand, as Charlotte Nelson, finance expert at Moneyfacts, explains:

"Potential landlords are clearly conscious of the upcoming increase in stamp duty on second properties, which is due to come into play in April. It has sharpened the minds of investors, and as a result, many are looking to buy before the changes are implemented.

"This extra demand means that providers are competing heavily to attract landlords' custom, leading to some of the lowest deals on record. For example, the average two-year fixed rate BTL mortgage has fallen by 0.85% in just two years, while the number of products offered to borrowers has more than doubled."

Growing potential

Demand for rental properties isn't exactly falling, either, and if anything is continuing to rise. It's the perfect combination: high rental demand, together with low interest rates, offers the ideal backdrop for landlords, with the potential being easy to see.

Arguably, many pensioners could be seeing this as a profitable solution, too: "Pensioners who now have access to their pension pots and are fed up with the poor returns in the annuity and savings markets are particularly likely to find this sector appealing," said Charlotte, but she cautions that anyone considering investing in BTL would be wise to seek out independent advice to make sure that they not only get the most cost-effective deal, but that it also suits their income and lifestyle requirements.

However, if you're looking to take advantage of the market, now's the time to act. Rates may be falling now, but as the implementation date of the new stamp duty levy approaches, it's highly likely that some potential landlords will be deterred. This will lead to an inevitable drop in mortgage demand, and it'll be interesting to see what changes occur to the overall BTL market after the charges are increased in April.

What next?

Compare BTL mortgage rates

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.