Landlords Still have Appetite for Future Property Investments, Claims Study

Although most have been affected by recent and ongoing restrictions to tax relief on finance costs, landlords still have an appetite for future property investments, found a recent study by Mortgages for Business.

Results from the latest Property Investor Survey show that the proportion of landlords seeking to expand their portfolios has grown to 48%, up from 45% in November last year and 41% a year ago, shortly after the 3% Stamp Duty surcharge on additional properties was introduced.

The survey was conducted over a two-week period in May this year, having been sent to Mortgages for Business clients, and advertised on social media and landlord forums. A total of 186 property investors completed the study, answering questions on their portfolios and how they are financed.

At the same time, landlords have been increasingly opting for five-year fixed rate mortgages, rather than three-year fixes. In May 2016, three and five-year fixed rate deals were each preferred by roughly one in five landlords (18% and 21% respectively).

In the time since, however, there has been a huge shift in investor preferences. Five-year fixed rate mortgages are now the preferred option for 42% of landlords, up from 33% in November last year and twice that of May 2016.

Three-year fixed rate deals, meanwhile, are now less popular than even ten-year fixes, being chosen by just 5% of respondents – less than a third of the proportion last year.

The COO of Mortgages for Business, Steve Olejnik, comments on the study: “Although we expect buy-to-let lending to reduce somewhat this year, these results demonstrate that landlords are a resilient bunch, capable of adapting their investment strategies to successfully accommodate the new fiscal and regulatory landscape. Incorporation is becoming a standard practice and the move towards five-year fixed rates allows landlords to maximise their borrowing options.”

When asked how investors were adjusting to the changing economic environment, 62% claimed to have consulted a professional tax adviser.

Of these, the majority (34%) had sought advice specifically because of the changes to tax relief on finance costs, while 28% said that they already had an existing relationship with a tax adviser.

Although it is positive to see many landlords seeking professional advice, Mortgages for Business urges the remaining 38% of investors to ensure that they understand how their tax liabilities may be changing.