Landlords Abandon Buy-To-Lets

22/08/2018

Landlords are deserting the buy-to-let market after tax changes and tougher borrowing conditions that are now “really starting to bite”, reports The Times Online.

The number of buy-to-let mortgages completed in June dropped by just under a fifth compared with a year earlier according to UK Finance, a trade association.

The 19.4 per cent drop to 5,400 loans continues the steady decline over the past eight months. Since November, the number of buy-to-let mortgages has fallen every month on an annual basis. June has shown the biggest fall so far, followed by a 19.1 per cent fall in March.

Both the government and the Bank of England have introduced significant changes to the buy-to-let sector over the past two years in an attempt to dampen demand for rentable properties. About 60 per cent of Britain’s landlords own only one rented property, with the number of privately rented homes in England alone rising from just over 2 million 20 years ago to 4.7 million today.

John Eastgate, sales director at One Savings Bank, a specialist buy-to-let mortgage lender, said “The impact of these tax changes is really starting to bite”.

Separate research from Savills, the estate agent, estimates that 53,000 properties with a buy-to-let mortgage have been sold over the past 12 months, which is the biggest drop since 2007, as landlords choose to sell up.

In April 2016, the government introduced a 3 per cent stamp duty surcharge on second home and buy-to-let purchases in an attempt to ease the competition faced by first-time buyers.

The government also began a tapering of the tax relief that landlords can claim on their mortgage interest costs. In 2015 George Osborne announced that it would be cut back gradually to the basic 20 per cent rate of income tax by 2020. In the past landlords could offset mortgage costs against rental income and pay tax only on what remained. The tapering began last year.

Mr Eastgate said there were likely to be further falls ahead as landlords saw the effect. “People who are doing their tax returns from now onwards may suddenly find they owe more tax than they anticipated,” he said.

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Written by Claire Allison | Mortgage Consultant

Claire joined Mantle Financial Planning in 2001 having worked in the travel industry for several years. Read more >>

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