According to Samuel Tombs, chief economist for the UK at Pantheon, buy to let businesses can be more profitable than they were two years ago.
Many people believe that because of increased stamp duty and cuts to tax relief on buy to let commercial mortgages, profits have fallen. Samuel Tombs argues that because of low interest rates, landlords are better off than they were two years ago despite these extra costs. To support his view, he states that the average two-year fixed rate mortgage at 75% loan to value, was 2.37% in May 2018, compared to 3.21% in May 2016. He stated that:
“A buy-to-let investor refinancing a two-year fixed mortgage that they obtained in May 2016 will save £1,400 per year in interest payments, assuming that they have purchased a property of average value.
“After the tax reforms and the fall in mortgage rates, virtually all buy-to-let investors are better off.”
These figures could change if the Bank of England raises the interest rates. In the June 2018 meeting of their Monetary Policy Committee, a majority of 6 to 3 voted to keep rates at 0.5%, but the Bank indicated that a rise to 0.75% could happen in August. If this happens, Tombs predicts, that most landlords will keep their properties rather than sell in response to increased mortgage payments.
Many landlords benefit from the capital growth of their properties. There has been a slowdown in house price growth and this could lead to some landlords selling properties.