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Bank Of England Reports Tax Changes Harming Buy To Let Investment

Tax and regulatory changes are negatively impacting the buy to let sector according to the new data from the Bank of England.

The value of mortgages taken out by landlords has fallen again during the second quarter of the year in comparison to the same period of 2017. Since 2016, buy to let lending has fallen dramatically. The introduction of the 3 per cent stamp duty surcharge, as well as the phasing out of mortgage interest relief and the 10 per cent wear and tear allowance has seriously impacted landlords.

The data released yesterday by the Bank of England noted a decline in both new buy to let lending as well as remortgaging by landlords. This is in spite of the fact that the outstanding value of all residential loans continued to grow, increasing in the second quarter of 2018 to £1,417.2 billion, which is up 3.8 per cent year-on-year.

New loan commitments that were agreed to advance in the coming months during Q2 this year reached a peak that had not been seen since Q1 2008, according to the figures from the Bank of England.

However, the overall proportion of remortgaging and buy to let loans in particular have fallen in recent times, according to statistics. Buy to let mortgages accounted for a mere 13.1 per cent of new lending. This change is largely down to recent regulatory and tax changes in the sector.

Founder of mortgage platform Dashly, Ross Boyd, spoke out about the results: ‘Where homeowners tread, landlords are continuing to choose not to follow. For investors it’s more of the same, with the decline in buy to let lending since the first quarter firmly against the run of play. It’s more evidence of a slowdown precipitated by hostile tax changes in recent years that have left landlords licking their wounds.’

Source: Residential Landlord

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Fall in remortgaging and buy-to-let lending

First-time buyer mortgage lending increased in the second quarter of this year but remortgaging and buy-to-let experienced a decline.

Data released today by the Bank of England revealed the outstanding value of all residential loans continued on its upward trajectory, rising in Quarter Two (Q2) to £1,417.2 billion which is 3.8% higher than Q2 last year.

According to quarterly statistics, based on the lending activity of over 300 lenders and administrators, new commitments – which are loans agreed to advance in coming months – were at their highest level since the first quarter of 2008.

First-time buyers

There was also an increase in the amount of lending to first-time buyers and the proportion of high loan-to-income (LTI) finance has increased during the quarter too. High LTI lending was described as loans above four times the value of the annual income for a single buyer or three times the annual income for joint buyers.

However, the overall proportion of buy-to-let and remortgaging loans have decreased since the last quarter, the data revealed.

As a proportion of new lending, remortgaging accounted for 30.8% – a fall of 2% on the previous quarter. Meanwhile, the share of new lending for which buy-to-let accounted was also in decline this quarter, down to 13.1%.

Tax changes hitting buy-to-let

Ross Boyd, founder of mortgage platform Dashly.com, blamed the tough new rules facing landlords on the lull in buy-to-let.

He said: “Where homeowners tread, landlords are continuing to choose not to follow. For investors it’s more of the same, with the decline in buy-to-let lending since the first quarter firmly against the run of play.

“It’s more evidence of a slowdown precipitated by hostile tax changes in recent years that have left landlords licking their wounds.”

He added: “Traditional homeowners, though, are not feeling the pinch quite so much as arrears continue to fall. It’s yet another sign of consumer confidence, even if it’s not totally surprising with rates still on the floor by historic standards.”

Source: Mortgage Finance Gazette

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Buy-to-let lending tumbles by almost half since introduction of Stamp Duty surcharge

Buy-to-let lending is down 47% on levels before the introduction of the 3% Stamp Duty surcharge levied on the purchase of additional properties.

It is also down 64% compared with the pre-2007/2008 housing market crash.

In a new report on the residential housing market, Cushman & Wakefield say that with further phasing in of the reduction in income tax relief will ensure that lending activity stays muted.

The consultancy also notes that some landlords are selling off properties, and that there are only limited numbers of new investors entering the market.

Nevertheless, Cushman & Wakefield think that housing stock in the English private rented sector will contract by no more than 3% over the next two years.

Its report also shows a mismatch between supply and demand, particularly with the most expensive and cheapest properties.

In March, 6.1% of properties listed on Rightmove were at over £1m. However, just 2.7% of completed sales that month were for over 2.7%.

The opposite was true in the sub-£200,000 market, which accounted for 45% of all sales but just 30% of listings.

Source: Property Industry Eye