January saw mortgage approvals hit a two-year high, with 74,581 mortgage applications to fund house purchases approved.
This was up on December’s figures of 71,335.
Remortgage approvals also increased in January, to 42,228 – nearly 2,000 more than the previous six-month average.
Perhaps the main factor driving up these figures is the new tax on buy-to-let properties and second homes, which will be introduced next month. From April, buy-to-let landlords will need to pay an additional three per cent stamp duty when they buy a property.
Because this tax hike could potentially add thousands of pounds to a landlord’s purchase costs, analysts believe that the recent increase in mortgage approvals is being driven by applicants looking to purchase a property to rent out before the stamp duty goes up.
Demand for buy-to-lets
While the coming stamp duty changes will make things more expensive for people wishing to invest in a buy-to-let property a Bank of England survey released in January suggested that demand for mortgages from landlords was likely to keep rising until that time comes. Nearly a third more lenders believed demand for buy-to-lets would grow between January and March than those who thought it would drop.
Investing in a second property is something that takes careful consideration; you’ll be taking on a second mortgage, which means you’ll have two lots of important repayments to make. If you start to fall behind with these, your home – or homes – could be at risk.
From April, people buying a second property - whether they’re investing in a rental opportunity, purchasing a house for their children or treating themselves to a second home – will pay more stamp duty than someone just buying a home. Let’s look at the figures broken down:
House price Stamp duty charge on residential homes (%) Stamp duty on buy-to-lets (%)
£0 to £125,000 0% 3%
£125,001 to £250,000 2% 5%
£250,001 to £925,000 5% 8%
£925,001 to £1.5m 10% 13%
£1.5m and above 12% 15%
What if I haven’t sold my home?
With stamp duty on second properties set to increase, you might be worried about how this could affect you if you end up technically owning two homes because you complete the purchase of one property before you sell the other one. Unfortunately, if this applies to you then you will be liable for the increased stamp duty.
However, as long as you sell your previous home (and it was your main residence) within 18 months of completing your purchase, you can claim a refund of the additional tax you had to pay.
For tips on becoming a buy-to-let landlord, click here.
Disclaimer: All information and links are correct at the time of publishing.