Thinking of becoming a landlord?

One in ten UK adults are interested in becoming landlords and taking out a buy-to-let mortgage in 2019/20, according to a recent survey. A change in income was the main reason people were considering taking their first foray into the world of buy-to-let investment research found. Nearly a third of those considering becoming landlords said they were “encouraged” by current opportunities in the buy-to-let market. Meanwhile over 25% admitted they were going down this route because they had received an inheritance or had become “accidental landlords”.

What can a buy-to-let investment offer you?

Interest only mortgages

Good potential returns on capital invested

Attractive mortgage interest rates

Potentially better returns than on offer at high street banks

North for better returns

Landlords seeking higher rental growth should look to the north, with Scotland having the highest year-on-year rental growth at 1.74%, the Rental Index has found.

In Scotland the average rent is £750, only a little less than the UK’s average, discounting London (£773). Edinburgh City has the highest rental growth of any geography in the UK, with growth of 5.44% year-on-year.

Landlords can rest assured that there is decent rental growth to be found across the UK, particularly if they look north of London. On the face of it, landlords have had a tough time in the past few years, from increased regulatory pressure to a significant increase in stamp duty costs, yet they have managed to shoulder many of these costs without passing them onto tenants.

Landlords need to look closely

Deciding between a two or a five-year fixed mortgage has just got a little trickier as new analysis reveals the cost of repayments between the two deals has narrowed.

Borrowers often find mortgages with rates fixed for five years more attractive when they are looking for long-term certainty over their repayments, something which can prove beneficial if the Bank of England base rate goes up. Meanwhile two-year deals, which offer a shorter-term option and more flexibility, tend to come with cheaper rates. But new data published by financial data providers,, revealed the gap in average rates between these two types of deal has narrowed, with the difference in price at a seven–year low. This means longer-term options have begun to look more attractive when it comes to value.

Currently the average two-year deal comes with a rate of 2.85% while its five-year counterpart comes in at 3%. This is a difference of 0.15% which is much lower than the 0.42% gap between the two deals recorded last year and has had a direct impact on repayments.

Buy-to-let limited company

Half a decade ago, there would have been few in the mortgage market who might have predicted limited company buy-to-let as one of the major growth areas in the years ahead. Without reckoning on some considerable government and regulatory intervention, how could they know?

But, that’s exactly what the buy-to-let sector and landlords have been subjected too, and while there appears to be no let-up in that regard, the market has shifted to accommodate how landlords might wish to take their portfolios forward and how they can try and secure the mortgage interest tax relief which has been steadily cut for those holding properties in their own names.

While we might not have seen a big move of existing rental properties into limited company vehicles – blame the stamp duty increase for that – landlords are now much more likely to purchase new properties within a limited company vehicle, and because of this, even our very biggest buy-to-let lenders have needed to respond to the shifting nature of the sector. Indeed, as time goes by, and landlords see how the ongoing cuts to mortgage interest tax relief impact on their profitability, you can’t help wondering if – even with the large stamp duty outlay – landlords might feel they need to bite the bullet and move existing properties (held in their individual names) into those limited companies.