Worst Over? Buy To Let mortgage market bounces back

Michael - that is exactly the issue for those of us who bought 20+ years ago in the South. When we bought indexation or taper relief existed. We were advised by accountants that buying as a limited company was a bad idea. Higher fees and less finance options, not viable for small portfolios, etc. How many of us knew how many houses we would eventually own when we started out? Now if we sell a house the CGT bill is often over £100K per property. But that's mainly due to inflation not improvements. Restoring indexation relief and taxing us at our marginal rate on any genuine uplift in value would be more palatable. In other countries CGT is zero after a certain number of years. Without a fair CGT treatment it's hard to see why new landlords would buy with the intention of long term ownership. Short term ownership is disastrous for tenants.
So as you say, we are being held to ransom. With hindsight maybe we should have ignored professional advice and set up limited companies decades ago but no one could foresee that the government would forget why BTL was born and try to destroy it.

Agreed Jo, my accountant also strongly advised against setting up a company, and that was back in the days of indexation and taper relief

Whilst CGT is difficult to swallow & much of the gain is due to house prices going up, house prices have gone up much more than many other assets. When you take into account the income received & the gain even after tax, many of us have done pretty well. I have no. intention of being an 80 something year old LL making a mess of my business. Sell up, pay the tax & either spend the money or give it away asap.

I think the problem for some Landlords are that they have borrowed money to buy other properties and therefore from their purchase price to their CGT obligations, once mortgage re-payment is paid then there is no money left or you need to find some to pay the CGT.
I would add I am not in this situation and will be keen to sell. Anticipating a CGT bill of under £20,000 for a gross profit of £101,000. Any profit will be invested and paying down mortgage debt.
I am worried that when labour get in they will increase CGT to match income tax. Therefore CGT would be at 40%. Hence I am re-thinking what and when I sell!

Trust funds will get around some of these issues Michael.
I thought the so called tories pledge was to make tax simple. They have seriously let us down on this also.

Andy, the Tories have seriously let us all down on all fronts, they certainly are not conservatives that I recognise

Completely agree Andrew.

Even a reduced level of debt is going to be far more expensive to service.
The fixes I have ending this year range from 1.99% to 3.55%. Current offerings for those properties for a portfolio landlord in my tax band are mainly around 5% with a 3% product fee added to the loan. Even if I try to reduce the amount I owe that 3% product fee soon ramps it up again.

Hi Jo, I hope that your endeavours to get a mortgage are more forthcoming than mine. I will be 58 this year, work part time and have a service pension. Combined it is a good income.
My portfolio is around 49% loan to value and I could not get a mortgage as my rents were too low. My rents are higher now but the mortgage rates are much higher. I'm not going to waste my time trying to get a better deal currently as I believe I will still not meet their criteria. I will sell further property in order to pay down the mortgages on the properties that I wish to keep.
What caused me issues is that I had a portfolio of 10 houses, it is now 8. The lender stated that as I had so many properties it went against me!
Since then, the Government have removed one of the stress tests, so it is possible that I could get a better deal. That said I need to let my tenants know that I will be increasing my rents substantially.
Like others on this site I let well below market prices as you want to keep good tenants. I had not realised how much rents have increased, even though I have been putting up my rents most years. As an example a house in Wiltshire I let for £725, when I had an estate agent round to value they informed me current rent for this property would be £1050-£1100 and that was 9 months ago!
I fear for my tenants, as it maybe that none of them can afford the rent I will be proposing in which case I will be selling a lot of properties.
I have now gone beyond anger towards this government and my realist head has now taken over for me to re-structure.
I had been optimistic that this challenging period would be short lived, I now concede that I was wrong in this assumption. I don't think it will be catastrophic but the years have passed and I need to get myself in a more robust situation.
Lastly, like others I was told not to go Limited. It was the wrong advice, but too late to change now!

Spot on Tricia, though Section 24 really impacted me on reducing my mortgages. I had hoped to pass on a lot more to my children than I will now be able to do.

When I built up a £1 million BTL mortgage debt around 25 to 30 years ago, I had quite a bit less than 50% equity, was paying around £50 to £60k interest and barely covering my outgoings with gross rental income.

HMRC questioned why my rental income was so close to my outgoings but I was in it for the long haul and still have no intention of bailing out as I am only 73 years, 3 months and 1 day young.

Living in the People's Republic of Scotland I have also seen the future that awaits English Landlords and it's not that scary if you avoid sentimentality, stick to students who won't stay indefinitely and put rents up to the market rent as often as possible. Incidentally I have just started to do this last bit having done the same as most in leaving rents unchanged for good tenants - but not any longer.

My £1 million debt costs around £20k, fixed at 1.99% until December 2026 but even if it then trebled I would still be above break even based on gross rental income keeping up with market rates over the next 4 years.

My kids will also pay £400k less IHT than if I had repaid these mortgages over the years and my wife and I would not have enjoyed such nice holidays and a very nice holiday home, mortgage free

I'm not intending to increase my debt but compared to paying 28 % CGT, it's not a bad strategy to increase debt to enjoy later life rather than sell up and live off the 72% remaining equity, which will eventually attract a further 40% IHT.

Incidentally any "professional" to whom I have set out my past and current strategy has been horrified, unable to differentiate between "good" and "bad" debt!

Fortunately I have always trusted my own judgement over any risk averse bean counter or "adviser".

Robert, going back to the 70s I had a bank manager, that's when we had proper bank managers, he once said to me '' borrow money to make money boy, not to sustain a false life style'', better advice you could not want, and yes I did borrow in those days, not mortgages but straight forward bank loans, you took some risks which have seriously paid off, had I been braver I would likely now have 3x more properties, but I'm happy with my 16 bought and paid for I don't need any more

Hi Robert, I completely agree with your strategy and was doing similar. In an earlier post on a different topic I stated that when you started in this business makes a difference. Though a Landlord for similar time frame I did not really get going until 2003.
All was going well until section 24 put a big hole in my profit. Now, even though I based my plan on 8% mortgage rate my profit on the houses is negligible. Your strategy would not have worked under section 24 as you would pay 40% tax on rent income minus costs and 20% reduction on said tax. Therefore bad debt and good debt does not exist in the same way.
For Landlord's whom ventured into this business after 2008 whom are mortgaged must be staring into the abyss currently!
I take note of your points with rent and I can say lesson learned.
For me, I can sell most of my houses and will combine my passion for classic cars, I have 14 of them, into a hire business and hope to do this transition just prior to next year's election.
I have never been work shy, but for me I need to enjoy what I do!

Andy, you wouldn't happen to have an Austin Healy 3000 in your collection would you? always liked them, some yrs ago I helped a friend re shell an MGC, then we would sometimes swap cars for a weekend, I had a 3.0 LT Capri , those were the days when I was a petrolhead, no speed cameras then

Hi Andrew, i'd love to have either of those cars. I'm now into more modest cars. Dolomite Sprint, 80's Audi Coupe GT, Jensen Healey, Renault 16, Mazda 323 x2 MGB GT x2 FE Victor, Figaro, Golf, Saab 900, early Audi A4 and a 1969 Jaguar XJ6. All quite modest and i love working on them or driving them. Reluctantly sold my Jensen Interceptor Mk2 last year and just sold a very good Montego Mayfair.
Nostalgia is a powerful emotion for some :)

To be fair Edwin I never had a problem nor did my wife, it was never the 3.0 Capri at fault just some of the lead footed idiots that couldn't drive them

Those V6 Essex engined Capri's handled like a shuttle ---- Not allowed to use the word for a male Hen on this site. Wow!
The 2.8's were better. But Andrew is quite right, drive to the car's ability!

Both my Capris were MK2 Ghias maybe they were better than the MK 1, they were quick away from the lights though

I'd like to have one of the cologne Capri's now, i'd guess easily 30k plus.
I had 2 Capri's in my past, a 1.6 Laser and a 2.0GL. Liked both, but parking with that bonnet took some practise!