Buy-to-let – are rumours of its death exaggerated?

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Question

With the increase in stamp duty and reductions on tax relief, many financial experts predicted the death of buy to let investment. Though buy-to-let lending is down, landlords are resilient, and the sector is by no means an ailing one.

First-time property buyers have been encouraged by lenders who have launched buy to let commercial mortgages targeted at first time buyers. The loans are conditional on being employed with an income of at least £85,000 to qualify.

The Bank of England’s rate rise in November 2017 resulted in buy-to-let mortgages costing more, but in 2018, some lenders have cut their interest rates.

Many lenders are creating innovative lending products designed to make things easier. Technology is helping mortgage brokers through apps that calculates loan to value (LTV) and rental cover ratios for portfolio landlords. This can make it easier for brokers to advise borrowers on the available mortgage options.

To save tax, landlords have formed limited companies to own property. Some lenders have made their terms more favourable to limited companies by removing the floating charge on the business assets.

The media coverage of buy-to-let market has tended to be negative and alarmist. It is true that there has been less purchasing activity by landlords, but better deals and interest rate cuts are encouraging landlords to expand their businesses. Investors purchasing property in the right locations that have high rental yields are still attracted to buy-to-let investing, and the sector remains very much alive.

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