Rise of the retirement mortgage: banks overhaul buy-to-let rules to lure pensioners

·2-min read
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Mortgage lenders have eased rules which had prevented many retirees from investing in buy-to-let properties.

Accord Mortgages, part of Yorkshire Building Society, has dropped its minimum income requirement for buy-to-let customers.

Previously, applicants had to earn a minimum of £25,000 to qualify for a loan. This meant retirees with smaller pensions, or people with more of their wealth held in assets rather than cash, did not qualify.

Accord has followed NatWest, which eased its rules earlier this year. Around a quarter of lenders now no longer require any minimum income for borrowers to qualify for a buy-to-let mortgage.

This will allow many retired freelancers, consultants and business owners, as well as current workers who have chosen to minimise their income for tax purposes, to invest in property, said Angus Stewart of buy-to-let broker Property Master.

Since last year, landlords have faced a more onerous tax regime. They could previously deduct mortgage expenses from their rental income to reduce their tax bill.

However this has now changed and many landlords have been pushed into a higher tax bracket.

Mr Stewart said: "Customers without obvious income but where rental income is enough to meet mortgage payments will have access to a wider range of buy-to-let mortgage lenders, and can shop around for a better deal."

Lenders that demand a minimum income usually require from £15,000 to £75,000. First-time landlords are much more likely to be required to have personal income in addition to rental income, Mr Stewart said, as are portfolio landlords and those investing in houses in multiple occupation.

Chris Sykes, of mortgage broker Private Finance, said: "It is a welcome change for many. Those who treat buy-to-lets as their pension wouldn’t qualify for finance through Accord previously, but would now."

Rental growth rates are near a 10-year high in all areas of the country except for London and Scotland, according to Zoopla. Rents are forecast to rise by a further 4.5pc by the end of next year.

The supply of rental homes is 43pc below the long-term average, which has inflated prices and pushed down yields.

In addition to the tapering of mortgage interest tax relief, since 2016 investors have also had to pay a three percentage point stamp duty surcharge on buy-to-let purchases.

Landlord organisations claim this has forced a quarter of a million to sell up and exit the market over the past five years.

Have you considered taking out a buy-to-let mortgage? Let us know in the comments section below

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