Are we meant to feel positive about the future, or nervous? One hardly knows any more – which makes our advice crucial
Buy-to-let clients are probably feeling a little confused right now; indeed, the same sensation may apply to advisers.
After months of not entirely unwarranted Armageddon-style headlines in the consumer press, prompted initially by the announcement of cuts to landlord tax relief, the general feeling was that the buy-to-let market was not a happy place to be. Those of us who had operated in it for some time were not unduly concerned but even we had to accept we were being hit hard and profitability was taking a blow.
As expected, lenders hiked their rental calculations to minimise risk and landlords had to rethink their strategies and reassess their portfolios. As difficult as that was, at least we knew where we were. We were knuckling down and facing the challenges head on.
Now, however, a paradox is at play because, amid the challenges we face, lenders are shouting about their fantastic rates. We are seeing articles about how good a time it is to invest in buy-to-let. In fact, the words ‘good news’ are being used in articles about our sector for the first time in goodness knows how long.
But the challenges we face – the tax relief shake-up that will drive many landlords out of the market, the stamp duty hikes, the cuts to capital gains tax that the sector was unfairly excluded from, the tightened criteria – are still there. They have not gone away. So the question is: are we meant to feel positive about the future, or nervous? Optimistic or worried? One hardly knows any more.
OK, I am speaking somewhat in jest, but the fact is lenders are working hard to entice landlords back into the market and attract new investors with some show-stopping rates. Earlier this month, The Mortgage Works launched its lowest ever fixed rate at 1.79 per cent up to 65 per cent loan-to-value, while Aldermore reduced its five-year limited edition fixed-rate buy-to-let mortgage from 3.18 per cent to just 2.99 per cent. But will that be enough?
As all good brokers know, the rate is just one element of a product and should never be the deciding factor. I have no doubt that, by reducing their rates, lenders will spark more interest in buy-to-let. But it will take a lot more advice and consideration before investors sign on the dotted line.
And therein, I suppose, lies the real good news. It has never been more important for property investors to receive sound advice from an experienced professional.
Brokers, your clients need you – now more than ever.
Ying Tan is managing director at Buy to Let Club