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Buy-to-let mortgage rates slashed in effort to encourage potential landlords

As stamp duty rates increase, those with available capital are taking advantage of the price war between lenders offering low mortgage rates for buy-to-let fixed rate mortgages, giving landlords more reason to invest.

When George Osborne introduced a hike in stamp duty for those looking to purchase a second home, many UK property buying experts expected a huge fall in buy-to-let mortgage applications. Recent figures, however, have shown that the opposite could occur as a new price war has emerged from the largest lenders in the country.

In an effort to tempt potential landlords, banks have slashed the mortgage rates of buy-to-let applications, effectively nullifying any changes to the market proposed by the government. Both HSBC and Virgin Money are competing for business by dropping two-year fixed rate deals to less than 2%, with Virgin even offering three-year fixed rate mortgages at a staggering 2.48%.

The original reason for the stamp duty hike was to prevent landlords buying up too much affordable housing so that more first-time buyers stood a chance of getting on the property ladder. However, the shortage of new build homes and the continuing rise in house prices have hampered the proposed boost to those hoping to buy, leading to a slowdown in the housing market across the country.

As a result, those looking to sell their house quickly are either failing to receive their asking price, or spending a longer period of time on the market. The issue is compounded by the poor savings rates currently offered by the government, and the increasing awareness that even with the increased stamp duty, buying a second home is still considered by many as a better investment than simply relying on their ISA to fund them through their retirement.

“Banks are doing whatever it takes to get more people to borrow from them” said James Daley, founder of consumer finance website Fairer Finance.“With rates on other assets like cash at rock-bottom, lots of people are turning to buy-to-let as they see it as a safe option with the promise of greater returns.”

This continued dominance of landlords in the property market has a chance of increasing the number of those stuck in the rent cycle, making it harder to gather the necessary funds to purchase their own home, and ultimately driving down property prices as those looking to sell fail to gain their asking price. Luckily, there are options for sellers, such as property buying companies, who are willing to buy any house for cash, and cutting down the length of the house-selling process.

Looking to sell your house? Ask National Homebuyers for advice, as we buy any house. Call 08000 443 911 or request a call back to find out how much you could get for your property.

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