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| Buy-to-let deals now “encouraging” |
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Property experts have predicted a return of the buy-to-let landlord, as the choice of mortgage deals and demand for investment properties rises rapidly.
Buy-to-let landlords now have a much bigger choice of mortgages, with the number of deals rising 70% since last September. Landlords can now choose from more than 300 mortgages compared to just 179 deals a year ago, according to figures from Moneyfacts. But this is still a long way off the market’s peak in August 2007, when there were 3,662 deals available.
“This is encouraging news for investors, especially those who were locked out of the market as lenders slashed their maximum loan-to-values,” says Moneyfacts spokesman Darren Cook.
New figures from lender Paragon Mortgages show a surge in the proportion of landlords planning to purchase new properties, says managing director John Heron. “Tenant demand is strong and expected to grow in the coming years because of the rising population, net migration and the trend towards one-person households. This is tempting landlords back into the market.”
Despite recent improvements, getting a mortgage is still difficult. “Until lenders ease their lending criteria, there remains a dislocation between landlords’ desire to purchase property and their ability to do so,” he says.
Landlords will be hit by the increased rate of capital gains tax (CGT), which chancellor George Osborne raised to 28% for higher-rate taxpayers in the emergency budget. Basic rate taxpayers only have to pay CGT at 18%.
Charles Morley, head of sales at specialist lender Kensington, says the CGT hike was lower than expected, and shouldn’t do any lasting harm to the buy-to-let market. “This is good news because with our growing population and the difficult outlook for first-time buyers, we need to ensure a choice of good quality, affordable rental accommodation.”
The Government has also retained the annual £10,100 CGT tax exemption, so landlords could mitigate their tax liability by selling one property a year. And if they defer a sale until retirement, they may only have to pay tax at 18% on any profit.
Couples, where one partner does not pay higher rate tax, may also find it possible to pay CGT at 18%.
The outlook for buy-to-let may be improving, but right now, few expect it to return to its glory days of before the credit crunch.
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