Despite most landlords being hit by changes to mortgage tax relief, appetite for further investment remains, new research has revealed.
According to broker Mortgages for Business, the proportion of respondents looking increase their portfolios has risen from 45% to 48% since November.
It is also up on the 41% of landlords that were looking to expand their portfolios a year ago, just after the introduction of the stamp duty surcharge on purchases of additional property.
A total of 186 property investors completed the survey, answering questions on their portfolios and how they were financed.
The research found that landlords have been increasingly choosing to fix for five years instead of three. In May 2016, three and five-year fixes were each preferred by roughly one in five landlords – 18% and 21% respectively.
The broker said there had been a huge shift in investor preferences, with five-year fixed rates now the preferred option for 42% of landlords, up from 33%.
Three-year fixed rates are now less popular even than 10-year fixes, being chosen by just 5% of respondents – less than a third of their popularity a year ago.
Steve Olejnik, COO of Mortgages for Business, said: “Although we expect buy to let lending to reduce somewhat this year, these results demonstrate that landlords are a resilient bunch, capable of adapting their investment strategies to successfully accommodate the new fiscal and regulatory landscape.
“Incorporation is becoming a standard practice and the move towards five year fixed rates allows landlords to maximise their borrowing options.”
Last year, the government increased stamp duty on second homes by 3% to help free up property for first-time buyers.
Mortgage interest relief for residential buy-to-let properties has been reduced to the base income tax rate, which is 20%. Landlords were previously able to claim tax relief on the top rate of tax of up to 45%.
The change means landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
Landlords who own their properties as a limited company can avoid the changes to taxation and instead pay Corporation Tax, which is currently 20%, but set to drop to 18% from 2020.
By doing this landlords can claim the costs of running their buy-to-let properties as an allowable expense, effectively writing off the cost of their mortgage payments.
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