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Wednesday, 26 August 2009 15:02 |
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 Interest rates could be at 0.5% till 2013
A report by a chief economist from Standard Chartered bank (which basically means the report will be wrong, sorry couldn’t resist) forecast that interest rates could stay at 0.5% until 2013.
On the face of it that is great news for the property investor sitting on existing tracker rates – and it’s also better news for those of you looking to remortgage.
Lenders have been slow to reduce buy to let rates over the last few months and the margin between swap rates and fixed rates are almost at a record high.
So it seems unlikely that lenders will reduce the rates on their new mortgage products much more. So for those of you looking to remortgage, for example to release further capital to invest or to pay off a lender that offers you a discount, then there is no time like the present.
Buy to let lending to increase
One of our main buy to let lenders has informally told us that they were going to increase their lending target by 50% next month. Don’t get too excited though as the credit scoring system isn’t going to change!
London Calling
Is it me or is the London property market getting excitable again? Bizarrely we had one client last week that had agreed with a new build developer a month ago a purchase price of £250,000 only to be told last week that he had measured the apartment wrong and therefore the purchase price was increasing to £290,000.
It doesn’t take long does it!
Tip of the week 1 - Don’t let Gordon take 40%
We’re now making it our mission to make sure you have the right cover in place to protect your buy to let properties. We look at your current circumstances from a property investor’s viewpoint and in almost every case we have found ways to improve your cover.
What does this really mean?
• Well if you died today do you have things in place to cover your portfolio?
• Would your partner struggle to remortgage your properties should the lenders call the loan in?
• Are you paying money every month from a standing order and not even know what it covers you for?
In most cases the answer is really simple - consider putting your life cover in trust.
1. Quicker payment of claims. If someone dies and their plan is not in a trust, their representatives will have to obtain Grant of Representation before they can deal with the plan. This can take several months.
2. The plan proceeds may be free of inheritance tax.
3. At the moment, inheritance tax is payable at 40% on any part of an estate valued over £325,000 (2009/2010). But you can use a trust to gift some (or all) of the benefits on the plan to other people. The gifted benefits would no longer be part of your client’s estate if they die, which means these benefits would not be subject to inheritance tax.
If you do have life cover remember this - every month a payment is coming out of your bank account - make sure it counts!
Tip of the week 2: Reduce your tax bills by setting up a property management company
Back by popular demand Stephen Fay ACA, our specialist property accountant, has come up with another fantastic tax tip. Please do read these carefully because they really will save you money (also please feel free to contact Stephen who is on hand to answer any more detailed questions – his email is
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) Historically low interest rates means that many property investors are now making substantial rental profits – meaning potentially substantial income tax bills. One option to reduce income tax liabilities is to set up your own ‘property management company’ – without needing to sell your properties to the company.
This can mean paying tax at 21% rather than 40% - and enable a non-working spouse or family member to draw a £6k salary from the company and use up their personal allowance. Typically, tax bills can be legitimately cut by around 30%. As you would expect, there are some ‘rules’ to be followed: - The arrangement has to be a genuine commercial arrangement – this means that the company really must be providing the investor with management services (managing tenants, arranging insurance, managing mortgage payments etc). However the company may ‘outsource’ tenant-management to a Letting Agent.
- A normal commercial charge should be made for services provided.
- Ideally, to avoid any hint that this is purely a tax-saving set-up, the company would provide management services, at the same rate, to other investors as well as the owner – even just a couple of properties (tenant-management can be outsourced to a Letting Agent).
For investors with substantial rental profits, operating a property management company can produce substantial income tax savings. And, the costs of running the company are also fully tax-deductible.
Again wise words from Stephen.
As always we welcome any feedback you have on this blog. Just email
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to send your comments.
Call one of our advisors today for more information 01424 205 373
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