What the base rate rise means for landlords

What the base rate rise means for landlords
Much of the focus since the base rate rise last week has been on what impact the increase has on homeowners.

However, the rate rise also has implications for landlords, many of whom have already had to adapt to several other changes this year.

How landlords are affected

The rise in the base rate from 0.25% to 0.5% means steeper monthly mortgage costs for what could be thousands of landlords with variable or tracker rate buy-to-let mortgage deals.

Whilst in isolation a quarter percentage point change might not add a massive amount to monthly bills, it’s important to remember that many landlords have already been affected by the second home stamp duty surcharge, which was introduced in April last year.

There may also be restrictions on the amount of tax relief that they can claim on mortgage interest payments, under changes which came into effect earlier this year. Relief is gradually being cut back so that by 2020 it will be 20% for all tax-paying landlords, meaning many higher and additional rate taxpayers now face more expensive tax bills.

Landlords with four or more mortgaged buy-to-let properties, known as portfolio landlords, also face lenders examining their entire portfolio if they want to buy a new property. If lenders decide additional borrowing could leave them overstretched, landlords may not be able to borrow as much as they could have previously.

All these additional costs make it more expensive to be a landlord and could ultimately end up being passed onto tenants through higher rents.

Review your options

Remortgaging could help offset some of the extra costs landlords now face, so it’s important to regularly review existing buy-to-let mortgages and see if more competitive deals are available.

Landlords concerned about further rate increases may want to consider locking into a fixed buy-to-let mortgage for protection. Seek professional advice if you’re not sure which options might be available to you.

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