The proportion of landlords buying without a mortgage hit 61% in January - the highest level since 2007.

What’s the latest?

A record number of landlords are purchasing buy-to-let property in all-cash deals.

The proportion of landlords buying entirely with cash hit 61% in January, the highest level since records began in 2007, according to property services group Countrywide.

In fact, the level of buyers who have not used a mortgage for an investment property has been steadily increasing from 41% in 2007.

The group said it had noticed landlords were relying more heavily on cash than ever since the 3% stamp duty surcharge was introduced in April.

Why is this happening?

Johnny Morris, research director at Countrywide, attributed the trend to the high levels of equity landlords have built up in their portfolios due to rising house prices.

New rules introduced by Prudential Regulation Authority (PRA), which saw lenders impose stricter affordability checks on buy-to-let mortgage applications, may also have been a factor.

Although this change did not come into force until the start of this year, some banks and building societies tightened their criteria in advance.

Flat for sale in Tunbridge Wells.

Above: one-bed flat for sale in Tunbridge Wells, Kent 

Who does it affect?

Interestingly, the trend was most noticeable at the extreme ends of the market, with 65% of landlords paying cash for homes costing less than £125,000, while 64% of those buying a property worth more than £1m also shunned mortgages.

Landlords in the north east were most likely to make a cash purchase at 70%, followed by those in Yorkshire & the Humber.

Unsurprisingly, given the high house prices in London, landlords in the capital were the least likely to buy without a mortgage at just 42%.

Sounds interest. What’s the background?

The buy-to-let sector has been hit by a number of tax changes during the past year.

In April last year, the Government introduced a 3% stamp duty surcharge for people buying a second property, while it also abolished the standard 10% tax relief for ‘wear & tear’ for those renting out furnished homes.

And from the start of the new tax year, it will also start to impose a cap on the level of mortgage interest tax relief that can be claimed.

Commentators have warned that these tax changes make it more expensive to be a landlord.

These higher costs appear to be passed on to tenants, with Countrywide reporting a 2.6% hike in rents in January compared with 12 months ago.

At the same time, 36% of landlords said they had increased rent when signing a new tenancy, up from 27% last year.

London was the only area to buck this trend, with rents in the capital falling by 2.7% year-on-year.

Top 3 takeaways

  • A record number of landlords are purchasing buy-to-let property in all-cash deals.
  • The proportion of landlords making a cash purchase hit 61% in January, the highest level since records began in 2007.
  • The level of people who have not used a mortgage for an investment property has been steadily increasing from 41% in 2007.

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