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Posted on July 13th 2015 by admin-movingin

Will landlords flee the sector if their profits are halved?

Buy-to-let landlords face having their profits more than halved following last week’s Budget which will cap the amount of relief on mortgage interest to 20%.

Figures published in the Guardian at the weekend include calculations by Nationwide.

The lender says that a buy-to-let borrower with a £150,000 mortgage on a property worth £200,000 and with a rent income of £800 a month currently earns a net profit of £2,160 a year.

That would reduce to £960.

However, mortgage expert Ray Boulger of John Charcol sees even steeper declines.

He says that a borrower with a £120,000 mortgage on a buy-to-let property worth £200,000 and bringing in rent of £700 a month could see their annual profit collapse from £1,322 a year to £472.

The Guardian says that other figures prepared for it by London & Country Mortgages and SPF Private Clients also show similar steep declines.

The article suggests that the tax changes, which will be phased in over a six-year period, will mean that investors would do better to put their money into a bank saving account, even with today’s “miserable” returns.

It also suggests that people planning to use the new pension freedoms to invest in bricks and mortar will be deterred. It is not known how many private landlords buy with a mortgage: some estimates put the figure as low as 30%.

It is an interesting piece which ends with advice from Britain’s best known landlord, Fergus Wilson.

His tip? Bribe estate agents. Well, apparently.

“Go to your friendly estate agent and tell them you want to know about any two-bed mid-terrace house in Park Farm [the estate in Ashford, Kent, where Wilson began his property empire] immediately after they take instructions. Say: ‘I have £500 in readies for your pocket!’

“That is what I used to do in Ashford in 2002-2007. I paid the market price but gave a £500 tip. Also, I said: ‘If you cross me and sell me a pup, there will be no more £500.’

“Now Mr and Mrs Guardian Reader, I am a telling you the tricks of the trade.

“If you want to get anywhere in life, jingle the coins. I am sorry if it offends, but money talks.”