Q1 2017 saw landlords opting for smaller mortgages and cheaper properties, according to the latest edition of the Complex Buy to Let index by Mortgages for Business. Average loan amounts and security values fell among all property types, with figures for vanilla properties below any seen in the past year.
Q1 also saw the balance of the buy to let (BTL) mortgage market shift strongly towards purchases, with the effects observable across all properties. The change was particularly strong among complex property types, with purchases accounting for 41% of transactions involving multi-unit freehold blocks (MUFBs). This is up from less than 20% in the preceding two years.
Commenting on the results, David Whittaker, CEO of Mortgages for Business said:
“These figures represent a departure from the established norms, which have been mostly defined by the remortgage market. This time, however, we see new and unusual purchase activity from landlords, presumably because incoming changes to income tax relief have prompted them to re-examine their strategies.”
Somewhat overshadowed by the presence of such dramatic changes, purchases also accounted for 41% of transactions involving vanilla buy to lets. This is c.3% above the long-term trend, which is likely evidence of an ongoing process of landlords selling their portfolios to newly created limited companies. Although not cost effective for many investors, transactions of this type can help to reduce the tax burden on the landlord, often eventually offsetting the initial expense. Landlords are well advised to seek professional tax advice when considering whether or not to incorporate their existing portfolios.
The index can be found here.