One in five landlords plan to sell up

Around 380,000 landlords (19%) plan to sell their rental properties in the coming year, according to research by the National Landlords Association.

Nearly half (45%) of all landlords intending to offload property in the coming year said they planned to sell individual flats and apartments, with a third (33%) looking to sell terraced homes.

Only 7% of landlords who plan to sell this year said they were hoping to sell to other landlords, indicating that more properties will soon become available for first-time buyers and homemovers.

Richard Lambert, chief executive of the NLA, said: “These findings sound like positive news for potential new homeowners, but the reality is not everyone wants, or is in a position financially, to buy.

“In fact, if all these homes are sold as planned then it will lead to a significant fall in the supply of property available to those who choose to rent or have no other option but to rent”.

Challenges facing landlords

Many landlords are aiming to offload rental properties following the introduction of tax and regulatory changes in recent years which have resulted in extra costs.

For example, since April 2016, landlords have had to pay a 3% stamp duty surcharge on top of normal stamp duty rates whenever they purchase a Buy to Let property.

In addition, the amount of tax relief landlords can claim on mortgage interest payments is gradually being cut back so that by 2020 it will be 20% for all tax-paying landlords. Prior to April 2017, landlords could claim tax relief on their mortgage interest payments at their marginal tax rate, so either 20%, 40% or 45%, depending on whether they were a basic, higher or additional rate taxpayer.

Since the end of September last year, landlords who own four or more mortgaged Buy to Let properties have also had lenders scrutinise their whole portfolio if they want to apply for a mortgage on a new property.

However, it’s not all doom and gloom. Buy to let mortgage rates are currently extremely competitive, so remortgaging to a better rate can help landlords keep on top of their costs. The range of options available has also widened in recent weeks, with new lenders such as Sainsbury’s Bank and The Mortgage Lender entering the Buy to Let market for the first time.

Landlords considering reviewing their mortgages should act sooner rather than later though, as there’s a chance that interest rates could rise before the year is out.