As a result of higher finance costs, taxes and regulation Rob Morgan (pictured), Chief Investment Analyst at Charles Stanley is advising landlords against investing in BTL and says there are better places to put their money.

He does admit that the housing market’s Teflon-coated status has shown few signs of wearing off in the face of restrictive interest rates, and that the recent move by the Bank of England to cut the base rate for the first time in four years, from 5.25% to 5%, has fuelled optimism over the prospect of lower mortgage rates.

Significant headwinds to negotiate.”

Nevertheless he says that there are some significant headwinds to negotiate. Finance costs are increasing exponentially for any homeowners who are remortgaging and there is no guarantee mortgage rates will fall.

Stagnation

Any more reductions in the base rate will rely on a sustained fall in inflation, which is far from a given. If, as he suspects, bank rates instead hover around 4% in the medium term, there is likely to be a period of stagnation until affordability gradually catches up.

Tighter regulations and higher taxes have also eaten away at the yield available from rental properties, as well as increased the hassle.

Morgan concludes that investing in physical bricks and mortar for income isn’t as attractive as it once was, especially since higher interest rates have increased the return from safe investments such as government bonds and cash.

He adds that with Chancellor Rachel Reeves looking for extra revenue, investors should also focus on more tax-efficient investments.

Established in 1792 Charles Stanley is an investment management company and is one of the oldest firms on the London Stock Exchange.