12 November 2014
- Buy-to-Let market buoyant according to new index
- Gap in knowledge identified around tax implications for private landlords
- Consumer confidence growing as 91% believe they can afford their mortgage repayments
- 42% of pensioners will take lump sum from pensions to buy property
- 49% of homeowners who aren’t already landlords interested in becoming a BTL landlord in the next 2 years
Almost half of British home owners have aspirations to become private landlords, but fewer than 30% fully understand the tax implications of doing so, according to nationwide research carried out by Bank of Ireland UK.
Despite the burgeoning market that saw buy to let loans increase by 32% year on year to August according to Council of Mortgage Lenders (CML) statistics, it appears that many people who want to enter into a buy-to-let mortgage do not understand the potential implications of income tax, capital gains tax or inheritance tax on their finances.
The research also identified a general trend suggesting that consumer confidence is growing amongst existing home owners, as 91% of British property owners now feel that their mortgage payments are “easily affordable”.
The research also indicates that retirees are set to flood into investment property market following recent annuity rule changes. The research found that 42% of pensioners will take a lump sum to buy a property or to pay off their mortgage.
13% of pensioners will use a lump sum to pay off the balance on their own mortgage, while over a quarter, 29% intend to purchase homes on a buy-to-let basis to generate rental income for their retirement.
Moreover, the research found that pensioners in London are the most property-hungry, with almost half, 47%, saying that they intend to purchase property with lump sums drawn from their pension.
The research is part of a new buy-to-let index launched by Bank of Ireland UK which gives an indicator of the future health of the British buy-to-let market each quarter.
Scores in excess of 50 out of 100 indicate a positive outlook for the UK’s buy-to-let market. The results of the second edition of the Index revealed a positive view of the market at 60.8, up from 58.7 in the first wave of research in June.
Greater London’s index score has maintained its place as the highest in the country, at 69.
The Index in the first wave of research was lowest in the North of England at 51.7, some 17.5 points lower than its value in London, but Scotland indexed the lowest during the second wave, likely due to a dip in confidence owing to the uncertainty around the Scottish independence referendum.
The research also found that aspiring to build a property portfolio is high as almost half of homeowners who aren’t already a buy to let landlord would be interested in becoming one in the next two years, with around 1 in 6 (17%) of these very interested.
Bank of Ireland UK, through its partner the Post Office, is a provider of buy-to-let mortgages and is undertaking quarterly research amongst British property owners to monitor the attitudes of private landlords and homeowners in the buy-to-let market.
Mark Howell, Commercial Director, Bank of Ireland UK Mortgages said: “Our research has identified a massive knowledge gap in the area of buy to let mortgages, which is particularly concerning as the market is currently experiencing growth.
“It’s important that people seek financial advice on tax matters before making big financial decisions or investments, like buying a property to let.
“We launched our quarterly buy-to-let Index and research earlier this year so that we can provide the industry with valuable insight into the health of the buy-to-let market as an investment option and gauge its impact on the economy.”
ENDS
Note to Editors:
- Survey of 200 British property owners between 9-20 June and 5-26 September 2014
- 100 private landlords (small landlords only, those with under 10 properties in their portfolio)
- 100 homeowners (who either own their own home outright or are buying it on a mortgage)
- The B2L Market Index is formed by aggregating and averaging four index scores, each of which is measured on a scale of 0 to 100:
-
MAI Mortgage Affordability Index (how affordable overall are your current mortgage payments, for all your UK properties taken together- from 0 = not at all easily affordable to 100 = very easily affordable).
-
PPI Property Prices Index (belief that property prices in this region will rise faster than inflation in next 12 months- from 0 = not at all likely to 100 = very likely)
-
RVI Rental Values Index (belief that rents for private property in this region will rise faster than inflation in next 12 months- from 0 = not at all likely to 100 = very likely)
-
NPI New Purchase Index (likelihood of buying another UK property on a mortgage or outright over next 12 months, to rent it out – from 0 = not at all likely to 100 = very likely)
|
Buy-to-Let Market Index |
Index Values in June 2014 |
Index Values in September 2014 |
|
Mortgage Affordability Index (MAI) |
76.4 |
81.8 |
|
Property Prices Index (PPI) |
65.5 |
66.4 |
|
Rental Values Index (RVI) |
62.5 |
63.6 |
|
New Purchase Index (NPI) |
30.3 |
31.5 |
Council of Mortgage Lenders; Buy to Let gross advances £16.9bn January to August 2014; £12.8bn 2013 for same period.