At midday on 3 August, the Bank of England announced that it would not be increasing the base rate1. It remains unchanged at 0.25%, a historic low.
This news comes despite recent speculation that it may rise, after one Monetary Policy Committee (MPC) member, Andy Haldane, indicated he could back increasing interest rates at the meeting last month2. This statement, alongside the 3-5 vote in favour of raising the base rate, in June (a significant jump from 7-1 in May), were signs of an upcoming potential rate rise3.
MPC member, Ben Broadbent, quelled this speculation when he stated in July that the direction of the economy remains too unclear to increase the base rate4. Market commentators claimed the views of Broadbent were key to assessing the chances of a first rate hike in a decade5, something to take into account in future months.
The rate remaining low means that lenders can continue to be flexible and maintain lending levels in the UK. It also makes now potentially a very good time to consider a property purchase or remortgage, with speculation of a rate rise later in the year remaining among many market analysts.
In the mortgage market recently, there has also been attention drawn to buying or remortgaging Buy to Let investments through a limited company. This comes as more than half (51%) of Buy to Let lending, including both purchases and remortgages, was through limited companies in the second quarter of 20176.
These figures are in line with the alterations to the Buy to Let basic rate tax reduction, implemented from April this year. The changes will be fully in place by April 2020, when landlords will no longer be able to deduct any mortgage interest payments from their taxable profit.
Limited companies are not affected by this regulation change. Landlords who borrow through a limited company can continue to deduct all their mortgage interest payments when working out their taxable profits7, therefore saving money on their tax bill. However, landlords will still pay Stamp Duty and Capital Gains Tax, if transferring a personal property into a limited company, as this would be considered a sale and purchase.8
We may be able to assist professional landlords in transferring their properties into a limited company, whilst reducing their Stamp Duty and Capital Gains Tax costs. This is subject to individual circumstances. largemortgageloans.com is not authorised to give tax advice. It is advisable to seek guidance from your tax advisor when it comes to considering tax implications.
You may wish to take advantage of low rates and great terms currently still available. If you are looking to expand your Buy to Let portfolio through a limited company or as an individual, please call us 020 7519 4985 or send us an email to speak to one of our experienced Mortgage Managers.