October 17, 2022 11:38 am

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James Nicholson

Buy To Let Mortgage UK 2022. Interest rates are rising, the economy is heading for a recession. So what should property investors be doing?

Buy to let mortgage typically offers a safe, more controlled solution with a monthly return on investment for people looking to increase their income through real estate investments. Renting is still a popular choice among many people today, and there are no signs that this trend will change very soon, making buy-to-let a profitable strategy.



Is a recession coming to the UK?

Yes, there will be a recession in the UK. The Bank of England predicts that the UK will experience a recession before the year is over and that it will last at least through the following year. In fact, according to financial data, economists, and money experts, the UK’s economy will experience its longest downturn since the 2008 financial crisis. The BoE’s monetary policy committee predicts a sharp decline in real household post-tax income in 2022 and 2023. While this is happening, consumption growth is anticipated to decline.


Should I invest in BTL right now?

Your personal financial situation and goals greatly impact how you respond to this question. How stable are your current financial circumstances, for instance? Prioritizing building a “rainy day” fund over saving for a BTL deposit may be wiser if you only have a small emergency fund (say, 3-6 months’ worth of living expenses) available to you.

Keep in mind that many people can earn from buy to let. But unlike many other investments (like shares), it can really cost you money each month rather than just losing value on a spreadsheet. Consider the scenario where your tenants vacate the property and you are stuck paying the mortgage (on top of your own) for a number of months. Many people may experience severe financial hardship as a result. Remember that there is a liquidity risk associated with BTL investments. They can be challenging to sell quickly, particularly in a recession when many people will likely be trying to sell and prices will be under pressure.



The changing BTL market


Due to stricter tax regulations, investment in Buy To Let (BTL) has been more challenging recently. For instance, in the past, you could sell several BTL properties, go abroad for five years, and your gains would not be subject to capital gains tax (CGT). In addition, stamp duty was not charged on BTL properties priced under £150,000 and wear and tear allowance could be claimed up to 10% of the yearly rental revenue.

Additionally, all mortgage interest was waived. This allowed you to reduce your tax burden by deducting mortgage costs from your rental revenue. However, this is no longer the case as of April 2020. In contrast to the initial 40% effective tax relief that Higher Rate taxpayers got, you can now obtain a tax credit equal to 20% of your mortgage interest payments. Some landlords’ annual tax payment has increased by £1,000 as a result of this.


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