Good Time for Buy-to-Let

Good Time for Buy-to-Let

Within struggling British economy, one thing remains growing – private rental costs (PRC). Just during this summer, PRC grew stably from 1.2% in London median rents up to 2.5% in South West.

At the same time, chancellor Rishi Sunak has revealed a temporary overhaul to stamp duty rates. Stamp duty holidays came into effect in July 2020. It will remain in place until 31 March 2021.
The chancellor’s changes have pushed the minimum threshold to £500,000 – potentially saving new buyers several thousand pounds on every deal. The rules are different for people buying homes to live in and people buying to let them out, with landlords paying a little more.

Since April 2016, landlords have paid an extra three percentage points in stamp duty on each band when they purchase a buy-to-let property. After the new changes come into effect, the rates for landlords (and anyone buying a second home) is 3% on the portion of the property up to £500,000, then 8%, 13% and 15% respectively for the price tiers.

House price

Standard Rate

Buy-to-let/second home rate

Up to £500,000

0%

3%

£500,001 – £925,000

5%

8%

£925,001 – £1.5m

10%

13%

Over £1.5m

12%

15%

Regional changes

The Scottish government has increased the threshold of its Land and Buildings Transaction Tax (LBTT) from £145,000 to £250,000.

And the Welsh government has raised the threshold of its Land Transaction Tax (LTT) from £180,000 also to £250,000.

Overseas stamp duty

The UK government is considering introducing a 1% stamp duty surcharge on properties purchased by non-UK residents. This is due to ‘some evidence’ that house prices are being inflated by buyers from overseas.

A non-UK resident is someone who has spent under 183 days in the UK over the previous 12 months. However if that person spends a minimum of 183 days in the UK in the year after purchasing the house, they can apply for a refund.

The surcharge applies to non-UK residents, which can still include UK citizens – even if you have a British passport, you’ll still have to pay the surcharge if you don’t meet the 183-day requirement.

If you’re carrying out a joint purchase and at least one of you is a non-UK resident, the surcharge will also still apply.

Mortgage rates update for buy-to-let

Among many competing offers, we observe an increasing availability of finance across offers from the UK financial institutions (NRLA data).

Virgin Money – has reduced nine interest rates on its core buy to let range by between 0.04% and 0.3%. The largest reduction is on the two-year fixed rate at 75% Loan to Value with a £995 fee which has reduced by 0.30% to 1.84%.

Kensington Mortgages – has reintroduced their HMO and Multi Unit range. The products are available up to 75% Loan to Value with rates starting from 3.99% with a lender completion fee of 1.5%.

Landbay – has reduced the rate on its special edition two-year fixed rates for both 60% and 70% Loan to Value. At 60% Loan to Value, the standard two-year fixed rate has been cut from 3.09% to 2.95%. Meanwhile at 70% Loan to Value, the two-year fixed rate has been reduced from 3.19% to 3.09%.

Saffron for Intermediaries – has reintroduced their buy to let range. Products are available up to 75% Loan to Value with rates starting from 3.67%.

Alltogether, these factors make your new buy-to-let project more viable than ever. Rental prices are growing, there is a window of opportunity with a stamp duty holiday, and finance is more available than before.

ORACLE CAPITAL GROUP has reliable partner relations with numerous banks, funds and other financial institutions of the UK, EU and other regions, which allows us to find and negotiate the most favorable financing/loan terms for our clients. Our experience includes successfully completed projects in commercial property, leisure, hospitality, retail and student accommodation.

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