Buy-to-let mortgages down despite good profits available

5,500 new buy-to-let mortgages issued, worth £700m. Many landlords are believed to have been been put off purchasing new properties because of regulation and tax changes. Tax relief on commercial mortgage interest payments has been reduced and there are stricter affordability rules for mortgages for portfolio landlords who have four or more mortgaged properties.

All is not negative for the buy-to-let property sector though. Samuel Tombs, the chief economist at Pantheon Macroeconomics, revealed that because of low commercial mortgage interest rates, landlords can make more profits than they did two years ago despite the recent tax increases. He gave the example of a two-year fixed interest 75% loan to value mortgage, which fell to 2.37% in May 2018, compared to 3.21% in May 2016.

Also, the number of commercial mortgages targeted at first time landlords has risen sharply. As of July 2018, there are 1,268 buy-to-let mortgages for first-time landlords, which is the highest number on record. Rates start at 1.66% for a two-year fixed rate, or 2.3% for a three-year fixed rate. Interest only deals are available if landlords want to repay the minimum monthly repayments.

It should also be noted that profits from buy-to-let businesses are very dependent on the location. Some areas of Britain provide higher rental yields than others, so landlords need detailed research and advice before making new property investments.