Effects of the pandemic have caused considerable upheavals in the UK and all over the world.
The property market is one of them.
However, with the resilience of the “brick and mortar” investment, the repercussions have not been as harsh as other sectors.
True, house prices have gone up, and mortgages have not been as easy to obtain as earlier.
This is especially so in the case of buy to let mortgages in UK.
However, there are still positives to consider, and the expert brokers in the mortgage field will explain what’s happening to buy-to-let mortgages.
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Stamp Duty Land Tax Holiday
With the SDLT holiday till 31 March 2021, there has been a rise in the purchase of properties with no stamp duty tax payable for properties valued up to GBP 500,000.
Purchasers of more expensive buildings within this limit will benefit the most, as the SDLT savings will be higher.
Yield may also be higher, as rentals will naturally increase with the more expensive property.
However, a buyer purchasing a buy-to-let property still requires to pay a 3% surcharge on the stamp duty rates.
Deposits
The amount of deposit affordable can make a difference to the mortgage amount.
The higher the deposit, the more money the borrower will get.
Additionally, since a higher deposit leads to less risk to the lender, a better deal can be worked out.
With the advice of the best broker, a mutually beneficial agreement can be attained.
Demand
With the current unemployment scenario, incomes have reduced, and more people who cannot afford to buy their property are looking at rentals.
Also, with a scarcity of low deposit mortgages, the demand for renting property has increased.
More people are now working from home and would like their work-home space to be more comfortable and liveable.
Hence, some are looking for more significant accommodation with more space and larger gardens.
These are positives for a buy-to-let mortgage, but potential repercussions should be studied in detail.
An expert mortgage broker will be able to clarify the details.
Covid Vaccine
With the Covid vaccine’s approval and the probable positive effects, schools and colleges, among other business offices, factories, etc will reopen.
This will increase the demand for rentals, especially from the student population, looking at areas closer to their educational institutions or workplaces.
For students, the U-turn in the A-level grading means more students have qualified to secure admission in universities.
Hence, locations could play a big part in the Buy-to-let market, with professional brokers being able to advise on the best areas for a suitable mortgage.
Mortgage Costs
Despite mortgages being a bit more challenging to obtain, the rates have not varied much.
There has been a slight increase in the two year fixed-rate mortgage and an even smaller increase in the 5 year deals.
Interest Rates
Buy-to-let mortgage interest rates are usually higher than residential mortgages, but flexibility is involved.
The rate will probably depend on the amount of deposit.
Also, there are options for the type of interest – Fixed or Variable.
Fixed Interest
Gives a sense of security as the monthly amount of interest payable is known.
A rise in interest rates will not affect the payment.
On the other hand, the benefit of a fall in interest rates will not be available.
Also, switching over to a better deal during the mortgage term will not be possible without a hefty exit fee.
Variable Interest
As a fluctuating interest usually offered at the lender’s SVR – standard variable rate.
The borrower will benefit if the interest rate falls and, similarly, will have to pay more if the rate rises.
A popular type of variable interest loan is the ARM (Adjustable Rate Mortgage), which has a fixed interest rate for the first five years and then the rate is adjusted after that.
Conclusion
With the foreseeable future still not clear, it is difficult to predict the exact impact on property, real estate and mortgages.
However, the general feeling is that investors in buy-to-let can profit by such investment purchases, as long as they intelligently view all aspects.
This can be done with professional help from one of the best online mortgage brokers in the UK.
The main factor will be the budget, which will pertain to the property’s cost and all the other relevant fees.
This will have to be compared with the yield by working out the proposed rental income, after deducting mortgage and additional costs.
The property market is one of the most stable, and the advantages of buy-to-let mortgages seem to outweigh the drawbacks.
Pros
Long term investment, with income generated to meet payments, tax benefits.
Cons
The risk of having an empty property, repairs and maintenance costs.
However, these will have to be reviewed carefully, considering the end of the SDLT holiday, the pandemic and the Brexit deal.