The buy-to-let market faces various challenges, despite the fact that rents are rising at a record pace. These challenges include:
- Drag on investment returns and mortgage affordability from higher interest rates.
- A higher tax burden and energy-efficiency agenda.
- Falling property values, particularly in real terms after accounting for inflation.
Not all doom and gloom
It is not all bad news though. More lenders are starting to enter the limited company buy-to-let sector (which is more tax-efficient), and in order to maximise borrowing potential, a number of innovative products are being released by lenders with lower rates, but higher fees.
There is some light at the end of the tunnel for interest rates, with lenders slowly lowering their fixed rates. Long-term views suggest we will likely never return to the low rates levels of the past 10 years, but rates are expected to improve over the next 2–3 years.
We are also starting to see buy-to-let affordability calculators become slightly more generous, which may be a nod to lenders feeling we have turned the corner with regards to the peak in interest rates.
Expert advice for buy-to-let investors
As and when potential property investors feel that property values have ‘bottomed out’ they will be tempted back into the market by rental demand and the prospect of capital appreciation. Expert advice from accountants and mortgage advisers often helps to answer key questions, including:
- Holding properties directly vs. incorporating?
- Gearing to the maximum or not?
- Floating vs. short- or longer-term fixed interest rate?
At Lumin, via our new mortgage partners Davidson Deem, we can help with financing for property investors, whether this is their first investment property purchase, or in the case of experienced landlords, future purchases or rate renewals.
To find out more call the Davidson Deem team on 01202 884 111, or get in touch via the contact form.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Your home or property may be repossessed if you do not keep up repayments on your mortgage. Mortgage availability and terms depend on your individual circumstances and are subject to lender criteria. Past performance is not a reliable indicator of future results.
