Rates set to rise?

Buy-to-let mortgage rates are likely to edge upwards later in 2017 and into next year - even if the Bank of England keeps Britain's base rate on hold, brokers have warned.

The Bank's monetary policy committee voted by a majority of eight to one to maintain the Bank Rate at 0.25% yet again, marking eight years exactly since rates fell to too their previous record low of 0.5%. But because most banks and building societies price their mortgages based on their 'cost of funds', mortgage rates are not directly linked to the current base rate in the majority of cases.

Rents expected to rise:

Chartered surveyors expect rents to outpace house price growth in the next five years, a recent Residential Market Survey has found. Rents are expected to increase by 25% compared to just under 16% for house prices. The survey also revealed the government’s buy-to-let crackdown, especially the reduction in mortgage tax relief, is slowing down market sentiment.

The scale of the challenge government faces as it announces its new approach to housing is clearly demonstrated in the results from the latest survey. Not only are the headline price and rent series pointing to further increases over the course of this year, but more significantly the longer term. It is expected that rent increases will continue to grow at a faster pace than wages putting even greater pressure on affordability.

Landlords beating tax rises

The number of buy-to-let landlords that have begun purchasing new properties in a limited company arrangement has increased significantly in the last 12 months.

According to research over 75% of purchases are now in a limited company structure in response to the tax changes which are due to take effect.

From April this year, the tax relief landlords are able to receive on residential property finance costs will be restricted to the basic rate of income tax.

Before, a landlord would buy in their personal name and have the mortgage in their personal name and certainly the higher rate taxpayers, they were able to offset the mortgage interest against their income tax liability. For higher rate taxpayers that’s being phased out now over the next four years.

Rates rising?

The fear of rising rates is driving landlords to re-mortgage, new research shows.

According to the research the number of landlord re-mortgagors fearing a rate rise has increased dramatically over the last 12 months. There were 15,200 re-mortgages carried out in January and February 2017 of which 39% of re-mortgagors surveyed said they anticipated a rate rise within the next year.

By choosing to re-mortgage landlords can reduce monthly repayments, move from a variable rate deal to a fixed rate or even release equity in the property.

With the number of competitive deals on the market growing, many borrowers are choosing to re-mortgage to take advantage of the low rates currently on offer. However, experts are warning that the record low rates we are currently seeing will not last for ever.