Buy-to-let mortgage interest relief cuts start to bite

  • 08/05/2018
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Buy-to-let mortgage interest relief cuts start to bite
Landlords are starting to feel the pinch of the flood of regulation changes affecting the buy-to-let (BTL) market, with tax relief cuts causing the biggest concern.


According to the latest Shawbrook Bank BTL barometer, the change that has most affected landlords is the reduction on tax relief for buy-to-let mortgages, with 52% of landlords saying this had the biggest impact.

This was up notably from last year when 35% said this had affected them most.

The changes began to hit in 2017-18 with only 75% of finance costs being allowed to be deducted from rental income and this has become 50% in the 2018-19 tax year.

The 3% extra stamp duty levy was reported as the second biggest regulatory change to have an impact with 21% of landlords feeling the effect of this.


Wait and see

Looking ahead, regulation (22%) was cited as the biggest issue facing landlords over the next six months, followed by interest rate movements (21%) and lending restrictions (16%).

This continued regulatory pressure prompted a range of responses, although half of the 253 landlords said they were going to wait and see what happened over the next 6-12 months before putting any measures into place.

In contrast, 33% of landlords have already, or are planning to, set up a limited company while 18% intend to re-mortgage and 19% were looking to sell properties.

Shawbrook Bank commercial mortgages managing director Karen Bennett said it was encouraging to see professional landlords adapting their strategy in line with regulatory change.

“We have seen a slight cooling as landlords evaluate their options, not rushing into purchases and holding existing property,” she said.

“It is important to recognise however, that BTL remains a crucial component in the wider UK housing landscape, and data suggests that although investors may tread carefully throughout 2018, they retain confidence in the fundamentals of this market.”

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