The UK property market has now been open again for six weeks following its enforced two-month suspension during the coronavirus pandemic lockdown and, with the easing of government restrictions on property transactions, the buy-to-let (BTL) market has also begun to recover.
The last five years have been tricky for BTL investors with changes in tax rules coinciding with sluggish growth in property prices and, this year, the near-overnight suspension of the property sector.
Initially, the response by lenders was understandably designed to mitigate risk as LTVs were cut, the product was removed or, in some cases, a temporary moratorium was placed on new applications.
A little over a month after the sector was green-lit to resume trading, there are signs that recovery is underway, with more products entering the market and rates on higher LTVs being reduced.
The decision by the Bank of England early in the lockdown process to reduce its base rate to an historic low has been passed on, in part at least, to borrowers and although BTL mortgage products are generally priced and structured differently to main home loans, there are some attractive deals to be had for investors keen to begin or expand their property portfolios.
Having said that, investors buying a BTL property through a limited company will broadly speaking, pay more for their loan than someone applying on a named-person basis would.
So there are some cost-effective buy-to-let products out there for those who are in a position to take advantage of them.
The bigger question is whether the market will see further movement to make buy-to-let a more attractive proposition in the future.
That’s a tough one to call because there’s still a great deal of uncertainty about the long-term effect of the pandemic on the UK economy. Personal financial security is likely still to be a big concern for individuals who have found their job situation squeezed, while lenders are likely to display greater caution around affordability.
Whatever post-lockdown normality might eventually look like, it still feels like it’s a way off yet – but until we reach a point where there is greater visible confidence in the economy (such as the removal of the furlough and job retention schemes, etc.) there’s little likelihood that higher LTVs or further significant rate reductions will make an appearance in the near future.
Against this backdrop is the fact that even before the pandemic hit, existing landlords were reluctant to expand their portfolios – indeed, a Paragon Banking Group survey showed that three times more landlords were planning to sell their portfolio than we planning to expand.
But property remains an attractive investment proposition for those who are in a position to do so. The key is in finding the right property and then ensuring you secure the mortgage that best serves your needs.
With the right strategy, a buy-to-let property can provide you with realistic capital growth and the potential to earn an income from it that will cover its associated costs. So whilst it’s essential that you consider all the advantages and disadvantages of a sector where values are prone to fluctuation, there are very clear potential upsides.
One of the biggest issues for property investors in the sector has been the changes in tax rules around stamp duty, mortgage relief and capital gains, and this is a particular area where you will need very specialised advice that’s tailored to your specific circumstances.
We would always recommend you engage the services of a professional mortgage adviser to give you the advice and guidance that best suits your needs – and ensuring you also have a trusted independent financial adviser (IFA) is a sensible step in assessing your overall financial situation in the context of any plans you may have to enter into the BTL market or to expand an existing portfolio.
At Oportfolio, we can support you through the application process to ensure you’re in the strongest possible position to apply for a BTL mortgage and we can identify products and lenders who will be best suited to your specific circumstances.
If you’re considering a buy-to-let property investment, or you want to take your existing property portfolio further, why not get in touch and talk to a member of our friendly team to see how Oportfolio can help you to fulfil your investment ambition?
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.