The latest Office for National Statistics (ONS) data shows that average private rental prices paid by UK tenants increased by a record rate of 5.1% in the year to June 2023. This will provide little relief to the estimated 1.4 million UK homeowners, including many buy-to-let landlords, with mortgages that are due to expire in 2023, who face a steep increase in their monthly payments following recent Bank of England base interest rate rises.
The impact appears to be already being felt, with ONS data collected in July finding that 45% of mortgage holders had seen their payments rise in the last six months, while 40% of tenants and mortgage holders reported that it was very or somewhat difficult to afford their rent or mortgage payments. Successive hikes have seen the interest rate on outstanding fixed-rate mortgages rise from 2.08% in November 2022, to over 6% in August 2023, meaning that many homeowners are facing increases of more than 50% on their monthly mortgage payments.
On top of the financial pain caused by rising interest rates, buy-to-let landlords have been hit by gradually phased-in mortgage interest tax relief changes, which now means that higher-rate taxpayers are unable to claim any tax back at all on their mortgage payments (after receiving up to 40% tax relief previously) because the new tax credit only refunds tax paid at the basic 20% rate. Furthermore, while incorporating a buy-to-let property will allow tax-deductible mortgage expenses, capital gains tax will be payable on the transfer to the company. Therefore, landlords who purchased their property in the past may not find this solution economically viable.
Our firm’s solicitors have invested in property themselves and understand the cash situation facing many buy-to-let landlords. We have decades of experience of buying and selling residential properties in the city of Liverpool and across Merseyside. Legal advice from conveyancing solicitors with local knowledge and expertise can be critically important in safeguarding the interests of a buy-to-let property buyer or seller.