Stamp duty overhaul could offer buy to let investors £50 million saving

Changes made to the stamp duty system are expected to give buy to let investors a saving of £500 per transaction

Lenders’ trade body the Council of Mortgage Lenders (CML) have released figures that show a continuous increase in the amount of loans granted to landlords who are using the money to purchase new properties.

The figure has doubled since 2010 during which 49,000 buy to let loans were taken out – the rate now stands at 9,000 buy to let loans awarded every month and equates to a total of more than 100,000 a year.

Taking this data from the Council of Mortgage Lenders into account, the estimated average value of a buy to let mortgage that is being used to buy property (in place of remortgaging an existing property) falls at £124,000.

Supposing the typical borrowing is equal to 60 per cent of the price of the property, this means there is an average purchase price of £200,000.

At this level, savings between the regulations of the old and current regimes come in at around £500 per transaction. Assuming landlord purchases continue at the present rate, this results in an annual saving of approximately £50 million.

Continued investment in Northern regions

The National Landlords Association (NLA), the largest body representing the private rented sector, welcomed the news and claimed the changes to the rules surrounding Stamp Duty are a “big win” for buy to let landlords.

A spokesperson applauded the introduction of a “straightforward” marginal tax system that means landlords can look forward not only to lower costs when buying properties but increased capital to invest in property
improvements and keep rent rates down.

The changes are also set to fuel the trend that has seen landlords focusing on properties in northern regions as ever-increasing prices in the south offer lower rental yields.

Ajay Jagota of KIS, a sales and lettings firm based in the North East, predicted that with many more properties priced closer to the £125,000 threshold than in other parts of the country the North East will be an area where buyers benefit the most.

This could potentially result in a bigger and faster return on investments and more funds to invest in improving property conditions.

See more Buy to Let news about the new tax rules.