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UCB says new Sipp rules will boost BTL

Nationwide subsidiary UCB Home Loans says the new rules allowing residential property to be included within a Sipp will boost the buy- to-let sector by 15 per cent next year.

A report from UCB says the additional business could see between 3bn and 5bn spent on rental property for use within a Sipp next year, with mortgages accounting for around a third of this figure.

The report says this trend will continue over following years, reflecting the change in the way that people org-anise their own pension arrangements.

An update from the lender points out the appeal that investors will see in being able to buy a 200,000 property for 120,000 and then get tax-free rental income.

UCB says it does not expect the increase to have an effect on house prices because it forms such a small part of the housing market but it may create some downward pressure on rental income as more rental properties become available.

The lender also warns of the downsides of taking advantage of the new regime such as concern about concentration of assets, the long term commitment required, overseas tax complications and the added expenditure of setting up and running a Sipp compared to a standard pension.

Managing director Keith Astill says: “Whilst the vast majority of buy-to-let lending will continue to be outside of Sipps, we will be looking at ways in which products may be adapted to help customers take advantage of the new rules.”

“We are unlikely to make any firm decisions until there is more clarity around the fine detail of the regulations – and that may not happen until next year.”

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