Buy-To-Rent Profits From Pensioners Cashing In Pensions
New pension laws had seen retirees spend their money to renovate or add an extension to their home, which would serve as their let properties. The 1,000 buy-to-let mortgages in the market shows the power of bank lures over retirees.
According to Data Think-Tank Moneyfacts, the new pension freedoms in April had increased the number of buy-to-let mortgages. The new rules allow savers to have unlimited fund access from age 55. With plenty of pensions cashed out, banks cashed in on wealthy customers by offering attractive deals on buy-to-let mortgages.
High rents and poor saving rates are the main sparks of the buy-to-let market engine according to Charlotte Nelson of Moneyfacts.
“With high rents and poor savings rates, it’s little wonder that the buy-to-let market is booming.
“The boom in deals has undoubtedly been boosted by providers taking advantage of the new demand from thousands of pensioners making the most of the new pension freedoms,” she said
The average buy-to-let variable mortgage rate had fallen from 6.66 per cent to 3.6 per cent in seven years, making it the ripest time of the year to take out a buy-to-let mortgage.
Nelson continues: “This can help many borrowers to make easy savings, which means that they can generate even bigger returns on their investment.”
However, the Bank of England believes that Britain’s booming buy-to-let housing market is a threat to “financial stability”. Experts oppose the view by stating the entire market could be undermined by the new tax laws George Osborne announced last July.
By 2020, Osborne said higher-rate taxpayers cannot deduct the cost of their mortgage interest from their rental income when calculating profits on which to pay taxes. Experts calculated that higher-rate taxpayers whose mortgage interest on a buy-to-let property increased by three-fold, meaning, they have lost all form of profit from their rental income.