Interest rates support Buy-to-Let

Interest rates support Buy-to-Let

24 Jan 2019

There exists a lack of clarity on new tax rules and impact of Brexit on buy-to-let options, but the demand grew in Dec - Jan in the UK commercial property sector, where a number of European investors have been buying low-risk properties. There are many investors from the Far East and China acquiring over 12 percent of such properties. The lack of availability of stocks has been a major issue for such investors seeking investment options in the North East regions.  

The data from HMRC indicates the number of residential property sold in the last year in the UK was 1,194,980, which was slightly low as compared to 1,220,060 homes in 2017, and was lower as a comparison to 1,235,020 transactions in 2016. About 103,240 residential-property were sold in the country in December, which was lower than November by 11.45 percent. The first quarter of 2018 was slowest, mostly due to heatwaves and bad weather conditions. The analysts believe the y-o-y comparison will increase in 2019. 

Change in tax rules to take effect in 2019 - 2020

Year-by-year change in regulations will make buy-to-let less profitable, where the interest deducted from rental income will reduce by 25 percent and the share of interest payments suitable for tax credits will grow 25 percent.  With the introduction of new taxes,  landlords will have to pay the income tax, stamp duty, corporation tax, inheritance tax and ATED. 

There is a difference in standard and buy-to-let (mortgage), where the interest rate of buy-to-let is more than standard ones. Such investments carry higher associated charges, taxes, and fees. 

Acquiring mortgages for buy-to-let

In the case of buy-to-let, the lenders will have to pay higher deposits, which can be in the range of 20 to 40 percent of the value of the property and the amount is mostly 25 percent of the property price. Bigger deposits are needed to get a better deal. The lender assumes the rental income should be 30 percent higher than the payments i.e. the rental income should be in the range of 125 percent to 150 percent of the monthly interest. 

Most lenders sanction loans if they believe the earnings will be over £25,000 in a year. The amount of interest determines the overall profit generated from such investments. 

The head of lending for Mortgage Advice BureauBrian Murphy suggests- there are opportunities in the current situations for the borrowers to get an ultra-low rate on a mortgage in the first few months of the year 2019, as the lending situation remains competitive and Buy to let mortgages low rates are offered by many lenders for the borrowers.  

Rightmove claimed the number of users increased in the last months of 2018 as compared to the same period in 2018. January first few weeks have been busy business weeks for the estate agents around the North, Wales, and Midlands, that are getting a maximum number of registrations from the buyers and sellers. 

To know more about UK properties, click Hamilton International Estates ( 

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