Buy-to-let deals on the increase with confidence growing

Despite a small reduction of 27 products since the start of this month, at 1,976, overall BTL product availability is still at the highest level seen since March 2020. This figure however remains far below pre-pandemic levels.

0% LTV remains the highest available tier, and in this tier the number of deals available has risen by 26 since December, indicating lender confidence is growing.

Both the average 2-year fixed rate for all LTV brackets (2.92%) and the equivalent average 5-year fixed rate (3.29%%) have risen to the highest levels since November 2019. At all LTV tiers, average rates are currently higher than recorded in January 2020.

Buy-to-let and a limited company

According to the figures, there were a total of 41,700 buy-to-let incorporations in 2020 – this is an increase of 23% on 2019. And it said the numbers had more than doubled since 2016, rising 128%, when tax changes for landlords were introduced. In 2016, the 3% investor stamp duty surcharge came into force and the proportion of mortgage interest deductible from tax on buy-to-lets held in personal names began to be phased out. This has led to a shift in the way investors purchase properties, with increasing numbers shifting towards limited companies to reap further tax benefits.

Between the beginning of 2016 and the end of 2020, more companies were set up to hold buy-to-let properties than in the preceding 50 years combined.

Despite growth of the private rented sector slowing in recent years, an increasing proportion of buy-to-let purchases are now being held in limited companies.

It is estimated that around half of all rental properties bought today are being put into a company, up from close to one-in-five during 2016. While most of this growth has been driven by larger landlords, smaller landlords, particularly those who are higher rate taxpayers, have also reaped the tax saving benefits from incorporating.

Is the buy-to-let market shrinking?

You only need to type ‘buy-to-let’ and see that one of the first news articles online is questioning whether the market is ‘dead.’ ‘Decline’, ‘is it worth it?’ or ‘doom and gloom’ are other phrases that probably spring to mind. While there is no denying buy-to-let (BTL) has had its fair share of bumps, but it is not doing as badly as people think.

Last week, UK Finance figures showed that, even with Covid-19, BTL purchases had risen every month for the past five months. In August this year, BTL activity was up by 23% compared to February. And that’s just last year alone. Additionally, the number of BTL products increased substantially.

Stamp duty deadline – Buy-to-let

Landlord research – undertaken by BVA BDRC and carried out between December and January with the results based on 846 online interviews – found landlords seemed confident about their ability to complete purchases before the stamp duty deadline. Only 14% said they would abort their transaction if completion did not look achievable. Of those landlords intending to purchase in Q1, 65% said they were very or quite confident they would complete by the 31 March.

When asked whether they believed the government would extend the deadline, 28% said yes, while 31% disagreed, although the questions were asked before the recent Parliamentary debate on the stamp duty holiday.

There has been growing industry support for a tapering of the deadline to allow those already within the purchase process to complete beyond the deadline date but still secure the tax saving.