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Michael Moore’s Latest Newsletter Editorial

26th October 2018

Twelve months ago the press were intimating private sector landlords would leave the buy-to-let market as a consequence of the changes to the tax system for landlords, combined with the Stamp Duty Surcharge of second homes and investment property. At Moores, we’ve actually seen an increase in the number of buyers looking for buy-to-let investments, with a sharp increase in the number of buyers purchasing through newly formed limited companies. I was hesitant to put this forward in our newsletter as our statistics are based on a relatively small number of transactions.

However, I read this week that the specialist brokers, Mortgages for Business, have released a data report stating that in Q3 of 2018, 44 per cent of completed buy-to-let transactions were made by limited companies. This is in contrast to 42 per cent last year. One third of the mortgage transactions were purchases, with the remainder being remortgages. This would seem to support my findings.

They also stated that buy-to-let lenders providing funds to limited companies has risen from 15 in Q3 2017 to 22 in Q3 of this year. Again, not a large sample but the 47% increase is consistent with the stats’ we have in-house.

There are now more than 600 buy-to-let products on the market aimed at limited companies. This has more than doubled in the past 12 months. This contrasts with the total number of buy-to-let products on the market which now stands at 1,571, up from 1,547 twelve months ago. It appears that lenders are now withdrawing products for individuals and concentrating on products for companies.

Fixed rate lending on buy-to-let’s rose from 93% to 96% of lending in Q3 according to Mortgages for Business. 73% of those taking a fixed rate opted for a 5-year fixed, indicating that most borrowers are expecting a rise in interest rates in the next couple of years. I’m not convinced about the need to take a fixed rate product at this time. From what I can see there’s no real pressure on interest rates, other than an edging-up of inflation. My expectation for a while has been that with no Brexit deal Government would need to reintroduce quantitative easing for the second and third quarters of 2019 to bolster a rather turbulent post-Brexit period. The BoE would be fool hardy to raise interest rates whilst pumping money into the economy. With a Brexit deal based on the Chequers proposal, I can’t see the market’s getting excited therefore what will be the factor that stimulates inflation to justify a rise in the base rate? I may be wrong, and an early shift into fixing a rate may prove prudent. We’ll have to wait and see.

Whatever happens to interest rates, the buy-to-let market is well and truly alive and unless we see a dramatic increase in build-to-rent, or a significant reduction in the population, demand for rented property will continue, as will demand for buy-to-let property as both rents and capital values are driven ever-upwards.

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