Proplend Asks: Is it Time to Let Go on Buy to Let?


This week, online marketplace for commercial property loans, Proplend, asked an important question: Is it time to let go on buy to let?

The website stated in its blog:

Proplend“In our article on 26th November 2015, just after the Autumn Statement, we briefly summarised the news and impact for buy to let investor community. The third budget statement of the calendar year carried with it a second wave of bad news for the private buy to let investor. After having the higher rate tax relief removed (phased in from April 2017) in the Spring budget, the Chancellor announced that new buy to let and second home purchases would be subject to a 3% stamp duty premium from April this year. This means a £175,000 property purchase will see stamp duty rise six fold from £1,000 to £6,250 and a £400,000 purchase rise from £10,000 to £22,000.


“These two announcements shift the buy to let goal posts and will make it difficult for investors to receive a desired return on investment. The bad news could continue as the Government has hinted at giving the Bank of England more power when it comes to limiting buy to lets, in the form of Loan to Value (LTV) restrictions on lending. This would not only affect new purchases but also those investors looking to re-mortgage their existing properties to release funds.


buy to let 2“The Government is under pressure to address the housing crisis and although these measures won’t increase the housing supply, they will satisfy one of their key objectives and increase the properties available to first time home buyers. They also hope that it will move the Private Rented Sector (PRS) into the hands of professional landlords ahead of predicted adoption of the Scottish licensing system.


“Last but not least the final pressure point on buy to let investors comes in the form of a pending rise in interest rates. A zero inflation rate continues to postpone the inevitable but a rate rise will come and it could have a dramatic effect on the investment’s profitability.”

Proplend went on to cite Telegraph Money, which suggests that buy to let investors purchasing mortgage property today are set to lose money within five years regards of where (in Britain) they invest:

“Using current house price, rental and mortgage rate data, the calculations suggest landlords who borrow a typical 75pc of a property price today will be losing money each month by 2021 in ten out of 11 British regions, including London.”

Is this considered bad news for property back investments? Proplend noted that’s not the case:

Model house with to let sign. Image shot 01/2004. Exact date unknown.“An area of property investment that was previously the reserve of professional investors and fund managers is an investment into debt rather than equity. In other words you lend someone money against their property and receive regular interest rather than buying the property yourself. By investing in debt rather than equity, you receive a regular fixed income over a fixed period of time while considerably reducing your risk and exposure to the fluctuations of the property market. Stop making mortgage interest payments and start receiving them.


“This has been made possible by the advancement of Peer-to-Peer Lending (P2P Lending), which enables private investors to lend directly to borrowers where their loan is secured against their property.”


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