Pension reforms lead to more BTL mortgages

Changes in pension regulations have led to an influx of lower rate buy-to-let mortgages becoming available on the market.

Figures from Moneyfacts, a financial product analyst firm, indicate that investors can now choose from 226 different fixed-rate mortgage deals, as opposed to 162 just six months ago. Additional statistics from the same report show that the average two-year fixed-rate deal has dropped to 3.45% from 3.7% over the same period.

Pension reforms

The new pension regulations, which came into effect on April 6^th, saw those over the age of 55 able to access their savings as a taxable, lump sum. Many are using this to subsequently invest in the property market.

As such, lenders are subject to fewer restrictions on their buy-to-let mortgages, with the transaction now being treated as business lending. This is in contrast to residential lending, regulated by the Financial Conduct Authority.

Charlotte Nelson of Moneyfacts.co.uk, believes that buy-to-let mortgages are, ‘experiencing a renaissance, becoming not only more widely available but cheaper too.’ She continued, saying, ‘with more five-year fixed rate deals charging below 5% than ever before, it is little wonder that the newly emancipated pensioners are genuinely considering buy-to-let as a retirement option.’[1]

Pension reforms lead to more BTL mortgages

Seek assistance

Nelson warns however that investors looking at purchasing a property as an alternative to a pension must, ‘seek the guidance of a financial advisor who can access a larger portion of the market.’ She continued by saying, ‘with easy savings to be made,’ with the right advice, people are more likely to be, ‘recouping more in rent, which will allow you to get a bigger return on an investment.’[2]

A word of warning has been issued by HMRC experts, who claim that pension-savers that do not ensure that they have tax-efficient methods of withdrawals could face large bills.

[1-2] http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11552236/Pension-freedoms-spark-flood-of-cheap-buy-to-let-mortgages.html