8:19 AM, 15th April 2016, About 6 years ago
The buy to let crackdown by Chancellor George Osborne has triggered a ‘price war’ as banks try to tempt aspiring landlords.
Lenders have slashed rates on buy to let mortgages to record lows in an effort to keep the market alive and growing.
Banks also reported a last-minute rush to buy second properties before a 3% stamp duty surcharge on second homes came in to effect on April 1st.
However, lenders had been expected to increase the costs of buy-to-let mortgages and the Bank of England had predicted a sharp decrease in lending following the new stamp duty rules.
The Bank of England is also aiming to enforce stricter affordability checks to limit risky buy to let loans and tax relief for landlords is also gradually being removed from next year.
The attempt by the Chancellor to slow down the market has led to lenders competing fiercely to attract new business.
The average rate for popular two year fixed rate deals has fallen to 3.32%, down from 3.59% last April and 5.21% in April 2011.
HSBC and Virgin Money have cut rates on two year loans to below 2%, according to analysis from Moneyfacts.
Low returns from savings accounts and pensions annuity rates has prompted households to consider buy to let property to fund their retirement, despite the fact that regulations are trying to make it less attractive.
“People have increasingly been considering buy to let as the best investment for retirement. Despite the initial costs which could be higher with the new regulations, the long term return from a buy to let property is still greater than what other methods are able to offer,” said a spokesperson for Property 118’s landlord insurance provider Discount Insurance.
The interest in buy to let by over 55’s may also be attributed to pension freedoms which came in to force in April 2015, with £3 billion paid out in cash lump withdrawals, according to Moneyfacts.