Franz Muehlthaler is a mortgage adviser for Holroyd Miller Properties in association with Reach 4 Mortgage Solutions & Mortgage Advice Bureau.
Here, he talks about fixed rate mortgages and possible interest rate rises.
Should I fix before the interest rate rise?
When the Bank of England governor, Mark Carney, finally announced that interest rates were set to increase at the turn of 2016, many of us began looking at remortgaging to a fixed rate to take advantage of the record-low levels before they increase. But, with the news of the economic slowdown in China and the subsequent falling stock prices in worldwide markets, including in the UK, a delay in the rate rise may yet again be on the cards.
The FTSE 100 (the index of the UK’s 100 biggest companies), closed at 4.6% on August 25 and, with the slowdown now looking much more substantial than a “technical correction”, it could affect the rest of the world in a bigger way than first thought, so the Bank of England’s Monetary Policy Committee is likely to delay any potential rate rise until further into 2016.
Whether this slump has any further to go or how long it may take for markets to recover is yet to be seen, which makes it all the more important that you seek advice from a professional mortgage adviser when discussing your next steps.
Are there going to be changes to buy-to-let tax relief?
In the first all-Conservative budget since 1997, the Chancellor, George Osborne, announced that the amount of tax relief that buy-to-let landlords can claim on the interest of their mortgage payments will be reduced.
While only for higher-rate tax payers, the changes mean that property investors who currently claim top rates of tax relief of 40% and 45% will only be able to claim relief in the future at the basic rate of tax, currently 20%. The withdrawal of the higher-rate reliefs will be phased in over a period of four years, in order to help landlords adjust to the lower relief level, and nothing will happen until April 2017. It will then be implemented in four stages:
Stage One: From April 6, 2017, the higher-rate tax relief can still be claimed on the first 75% of your mortgage interest costs. The remaining 25% will have the basic rate of tax relief applied.
Stage Two: From April 6, 2018, the amount of tax relief you can claim at the higher rates will drop to 50% of your mortgage interest costs. The remaining 50% will have the basic rate of tax relief applied.
Stage Three: From April 6, 2019, the higher-rate tax relief can only be applied to 25% of your mortgage interest costs. The remaining 75% will be at the basic rate.
Stage Four: From April 6, 2020, you will only be able to claim tax relief at the basic rate level. If you have any furnished holiday lets, this restriction will not apply.
The changes won’t take full effect until April 6, 2020, in five years’ time.