Buy to let landlords could cut their finance costs in half with a remortgage as tax changes eat into profit margins.
A good way to keep costs down is to look at lowering mortgage interest rates, and the good news is they have stayed low despite some tweaking by the Bank of England.
The main tax upheaval at the moment is the phasing in of lower mortgage interest tax relief. By 2020, all landlords will have a 20 per cent tax credit for property business finance costs regardless of the rate they pay in income tax.
Although changing how much tax relief landlords can claim for mortgages is weighing down many high leveraged property businesses, investors can find some surprisingly competitive rates.
Mortgage broker Property Master reckons landlords on a lender’s standard rate can cut their monthly repayments by up to half.
Angus Stewart, Property Master’s chief executive, said: “The increase in bank base rates has affected standard rates the most but it does appear the situation is more mixed among fixed-rate loans.
“Landlords look to be benefiting from a surge in competition among lenders.
“The good news is there are over 1,000 fixed rate mortgages alone on offer currently for landlords so shopping around is essential.”
Five year fixes are available for just 1.99 per cent from The Mortgage Works, the Nationwide Building Society’s buy to let arm.
Expect to find a two year fix ranging from around 1.6 per cent to 2.5 per cent.
The Post Office has a deal at 1.69 fixed for two years at 75 per cent loan-to-value with an arrangement fee of £1,495.
Virgin Money has a three year fix at 2.03 per cent with a £995 arrangement fee.
According to UK Finance, two out of three buy to let mortgages are remortgages.
The latest mortgage trend data shows 12,300 remortgages completed in September for £2 billion.
“Buy-to-let home purchases have eased again in September, suggesting lending in this market remains subdued as a result of recent tax, regulatory and legislative changes,” said Jackie Bennett, Director of Mortgages at UK Finance.