Shall I Buy To Let in 2018?

Posted on: 12th May 2018 in Mortgage & Property UK

Buy To Let (BTL) could be big in the UK in 2018. After the attacks last year by the UK Government on mortgage relief, it looked like the end was nigh for BTL. It’s no secret that Brits have always been fond of investing in bricks and mortar but, with home ownership in England at its lowest level for 30 years and the private rental sector doubled in size since 2004, maybe the fundamentals are in place to support a resurgence in UK landlords?  

Is this a good time to invest in UK property?

The Halifax, Britain’s biggest mortgage lender, has announced that UK house prices fell by 3.1% in April, the biggest drop since September 2010.  But is this a bad omen of things to come for UK property or a natural ebb in an otherwise flowing market? Russell Galley, managing director at Halifax, said that demand for houses has been weak in recent months, despite the onset of Spring and the usual start of the house-buying season.  Though this is not reason to panic.  Historically, house prices only fall rapidly and consistently when people are forced to sell up, through unemployment or big increases in borrowing rates. Galley states “The UK labour market is performing strongly with unemployment continuing to fall and wage growth finally picking up.  These factors should help to ease pressure on household finances and as a result we expect annual price growth will remain in our forecast range of 0% and 3% this year.” If you have the money to invest, property is an increasingly affordable option right now.  

A good time to borrow?

Interest rates were widely expected to rise this year following the increase last September from an historic low of 0.25% to 0.5%.  However, the British economy was hit hard in March by the “Beast from the East, which brought parts of the country to a standstill and slowed growth in the economy to just 0.1%.  UK retail sales saw the biggest drop in a year and the Office for National Statistics reported a fall of 1.2% in March as freezing conditions gripped the UK. Britain’s bad weather has meant that the Bank of England has frozen interest rates giving homeowners and investors time to cash in on the lower fixed-rate mortgages for a few more months. Experts in the economy predict that this reprieve will be brief, as interest rates look set to rise towards the end of the year.  

I’m new to Buy To Let – what do I need to consider?

It’s always a good idea to research your investment options for yourself, and your Holborn advisor can help you to steer your way through your investment choices and make decisions that are right for you and your future needs. If you, like many others, feel safe with bricks and mortar and are considering becoming a property investor, there are some important factors to bear in mind:

• Know where to invest – it sounds obvious, but putting in some research about what makes an attractive rental area, as well as property, can make all the difference to your rental income. Think about local amenities, transport and schools, and most of all your target tenants – what are they looking for in a property?
• Think about rental yield – this is a crucial factor within property investment and when calculating your investment income. To figure out what your yield will be, calculate the annual rent received as a percentage of the purchase price: e.g. £10,000 yearly rental income on a property worth £200,000 gives you a 5% yield. This can give a true sense of how the BTL option compares to your other investment options.
• Remember costs – BTL mortgages are usually sold on an interest-only basis, which makes them tax efficient, but things are changing. Whereas you could previously offset your mortgage payments against your tax bill, by 2020 you will get a maximum 20pc tax credit on your mortgage payments.  Add this to running costs, maintenance, and agency fees to weigh in all the factors that will impact you and your investment’s return.
• Get the best Buy-To-Let mortgage – your Holborn advisor can help you to find the best deal for you, and now is a great time to lock into a low fixed-rate deal. Our advisors in the UAE can arrange a competitive mortgage with one of the big UK lenders, so you can feel reassured that we understand how expats think.