Buy to Let Mortgage: fill your boots before April

Evidence of the way in which looming tax changes are turbo-charging the market was revealed this week by figures from the Council of Mortgage Lenders (CML). A strong surge in buy to let mortgage activity saw the number of loans issued in November leap up 35% on the previous year, as investors push to complete before the theoretical deadline this spring.

From April, landlords will have to pay an extra 3% across each stamp duty band. When one considers how long the home buying process can take – and allows for any bumps in the road along the way – there really is no time to lose.

Buying around the middle of February should still allow time to complete before April, but the timeframe is getting tighter. Some lenders have promised to prioritise purchase applications in an effort to help buy to let investors over the line.

A Bank of England survey suggests lenders are expecting demand to grow over the coming weeks. Those predicting the surge will continue outvoted the naysayers by 30%.

Also on the up are applications for company mortgages. Some investors have clearly been reading our analysis; shifting property ownership into a limited company vehicle is a way of avoiding both the stamp duty hike (although this loophole may be closed at some point), and the cuts to tax relief announced back in July, as professional landlords are currently exempt from both changes. Demand has skyrocketed, with companies now accounting for a third of buy to let mortgage applications, up from 15% in October. Banks are duly responding by boosting the number of loans available.

Of course, a company vehicle is more complicated than simply owning a property in your own name, and it can come with a large capital gains tax bill. It is certainly not something to rush into. If you would like to discuss the implications, we have an in-house tax adviser who can run through your options with you.

If you are proceeding down a more standard route and aiming to secure a buy to let mortgage before April, it is arguably even more important to speak to a broker. Anyone who can’t afford to hang around shouldn’t risk huge delays by going to a lender directly. A good broker will know exactly who to approach and how to speed the process up, and will be in your corner pushing hard to make sure the offer is out in time.

That is not to say that come April, a buy to let mortgage will no longer be an option. Its future, however, remains cloudy, and in the face of tax hikes and rising rates the transaction may not be as profitable after this spring.

Figures released this week put the total housing wealth owned by UK landlords well above that held by mortgaged owner-occupiers, further underlining the magnitude of the government’s policy shift. It is clear that promoting home ownership is Cameron’s priority; but, as Islay Robinson of Enness Private Clients puts it, ‘The government has a battle on its hands. Seeking to reverse the dominant housing market trend of the last few years will require a fundamental structural shift.’

For the meantime, our message is clear: fill your boots. Anyone thinking about a buy to let mortgage should be looking to complete before April, and the best way to do that is to get in touch with Enness.

For more information on the future of buy to let, have a glance through our ‘Buy to Let in Flux’ guide below. As ever, if you have any questions or simply want to talk through your situation with a specialist adviser, please do get in touch.