MortgagesFeb 12 2016

Brokers predict turbulent times for buy-to-let

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Brokers predict turbulent times for buy-to-let

A third of brokers believe that recent government reforms and regulation changes will limit the buy-to-let market, and in particular landlords’ confidence, this year.

Research from Accord Mortgages showed that half of the 100 brokers surveyed in November cited the reduction of tax relief (54 per cent), tighter lending criteria requirements (50 per cent) and a potential base rate increase (52 per cent) as having the greatest potential negative impact.

Half of them have already seen changes in landlord activity due to the reforms, with one in 10 experiencing a decrease in buy-to-let mortgage applications.

Yorkshire Building Society Group’s intermediary-only lender said the statistics also showed tenants are already being impacted by the changes, with 12 per cent of intermediaries saying landlords had increased rents because of the changes.

Brokers said landlords are making moves to overcome the challenges, with 10 per cent having seen landlords transferring properties into a company structure to reduce tax rates and a further 10 per cent stating some clients have assigned part of their portfolio to a spouse, from a tax liability perspective.

Accord’s poll also showed 30 per cent of brokers reckon landlords have been remortgaging to lock into low rates, ahead of a possible Bank of England base rate increase.

Some brokers still remain positive for the future of the buy-to-let market, with just under a quarter stating the market will continue to provide good long-term investments for landlords.

Chris Maggs, commercial manager at Accord, conceded the market has had a series of shake-ups during the last few months.

Mr Maggs said: “It is an unsettling time for landlords and brokers, and ultimately it looks like tenants may bear the brunt of the changes as landlords increase rents to meet their overheads.

“The knock-on effect of that is it makes it more difficult for tenants who want to get on the housing ladder themselves, as money which could go towards a mortgage deposit will now go on higher rent.”

Michelle Niziol, director at Independent Mortgage Solutions, said her firm has been inundated with enquiries since the announcement about the increase in stamp duty, prompting many clients to consider changing their current buy-to-lets into limited companies.

“There is likely to be a surge of buy-to-let business, with clients trying to get their applications completed prior to the new stamp duty tax.

“After this there will probably be a lull in activity as buy-to-let investors get used to the new tax implications.”