Lenders are cutting the cost of buy-to-let mortgages in a move that will bring some relief to Scotland’s army of amateur landlords.

The average two-year fixed rate has fallen by 0.71 percentage points in just two years, from 4.03per cent in April 2014 to 3.32per cent today, according to Moneyfacts.co.uk.

Skipton building society, for example, this month cut the rates on its buy-to-let mortgages by as much as 0.34 points on some deals. Landlords who are buying a property can opt for a two-year fix at 1.99per cent with a minimum deposit of 40per cent and a fee of £1995.

Or there’s a fee-free deal at 3.81per cent fixed for five years with a minimum deposit of 30per cent. If you are looking to remortgage, there’s a two-year fix at 2.75per cent with a minimum deposit of 25per cent or you can fix for five years at 3.71per cent. Both loans charge a £995 fee and include free valuation and standard legal fees.

But the relief of lower mortgage rates might only be temporary. The Bank of England’s Prudential Regulation Authority (PRA) wants lenders to adopt a tougher stance when deciding whether or not to grant a buy-to-let loan amid concerns that banks and building societies are too lax with landlords.

The PRA wants all lenders to use an affordability test, which should take into account all the costs associated with letting, including any tax. It also recommends that lenders make sure a landlord could afford the home loan if the interest rate were to rise by two percentage points.

Landlords are already feeling the squeeze of various tax changes. A surcharge on buy-to-let homes of three percentage points above the current rates of the Land and Buildings Transaction Tax (LBTT) came into effect on April 1. So, if a landlord buys a property worth £145,000, the rate of LBTT is 3per cent, instead of 0per cent, though a property worth £40,000 or less is exempt. Anne-Marie Roberts of ICAS says: “Where the total purchase price is £40,000 or under, there is no additional dwelling supplement but where the total purchase price is over £40,000 the 3per cent supplement applies to the whole £0 - £145,000 band.”

The surcharge pushes the rate for properties worth between £145,001 and £250,000 up from 2per cent to 5per cent. Landlords will pay 8per cent on the purchase price above £250,000 to £325,000, 13per cent on the band above £325,000 to £750,000 and a top rate of 15per cent for buy-to-let homes valued at more than £750,000.

Also from April, landlords can no longer automatically deduct 10per cent of their rental profits as notional wear and tear. Instead, they can claim tax relief only on costs they have actually incurred - and they will have to keep receipts. Previously, landlords could write off the 10per cent even if they had not spent a single penny on repairs or replacements.

Landlords also do not benefit from April’s cut to the basic rate of capital gains tax (CGT) from 18per cent to 10per cent, or the fall in the higher rate from 28per cent to 20per cent, as the cuts do not apply to any gains made on the sale of residential properties. George Osborne, the chancellor, explained that the decision was intended to “ensure that CGT provides an incentive to invest in companies over property”.

A future change could put a further dent in buy-to-let profits. At the moment, landlords can claim tax relief on their mortgage interest payments. So, if a landlord collects rental income of £10,000 a year, but pays mortgage interest of £9,000, the profit is the difference between the two, or £1,000.

Landlords pay tax on their profits according to their income tax band. A basic-rate taxpayer would therefore pay 20per cent tax on £1,000, or £200, and keep £800. The tax bill for a 40per cent taxpayer would be £400, leaving £600, or £450 for a taxpayer at the additional rate.

In future landlords will no longer be able to deduct all their mortgage interest when they work out their profits. Instead, mortgage interest tax relief will gradually be cut back to 20per cent between 2017 and 2020.

If you are a higher-rate taxpayer, the new tax will wipe out your returns if your mortgage interest is 75per cent or more of your rental income. The threshold for additional-rate taxpayers is when mortgage interest reaches 68per cent of rental income, according to Smith & Williamson, the accountant.

Charlotte Nelson, finance expert at Moneyfacts.co.uk, says: “The buy-to-let market has faced intense pressure recently, but despite this, mortgage rates have continued to fall across all fixed rates. However, while the current pressures on the market are not yet causing rates to rise, borrowers should remember that they will now be facing tax changes and tighter lending rules, including stricter affordability checks, so it is even more important for potential landlords to seek financial advice to see if buy to let really is the right option for them.”

Scottish landlords should also brace themselves for changes following the introduction of the Private Housing (Tenancies) (Scotland) Act, which will prevent landlords from stipulating a minimum tenancy term and allow tenants to terminate their rental agreement with just 28 days’ notice. It will also enable the government to cap rents if it thinks they are too high.

John Marr, senior policy adviser at the Council Of Mortgage Lenders (CML) Scotland, says: “CML Scotland believes that the overall effect of the proposed reforms will be to reduce the appetite of both landlords and lenders for buy-to-let borrowing and therefore restrict the availability of privately rented accommodation.”