If you are a buy to let investor, you might be forgiven for feeling just a little bit picked on recently. What with the increases in SDLT (Stamp Duty Land Tax) aimed squarely at you and the upcoming removal of mortgage interest tax relief, the ‘cons’ are starting to outweigh the ‘pros’ for many investors looking for a home for their money, especially highly geared, high rate tax paying Landlords outside London’s ‘magic circle'.
It is therefore worth sparing a thought for those poor souls yet to enter the sector as the Bank of England has recently announced plans to make mortgage providers impose stricter guidelines on borrowers in the buy to let market.
The Bank of England’s Prudential Lending Authority (PLA) has suggested that the buy to let mortgage sector is set to grow still further despite recent attempts to cool the market. It has therefore requested that lenders now stress test buy to let loan applications assuming a five year increase in interest rates to 5.5%. Many were already doing so, but at less than 5.47%.
These steps, if approved by the Bank of England in June, are expected to further reduce the number of buy to let loans granted every year, perhaps by as much as 20%. The Chancellor strongly denies that there is any collaboration between the Treasury and the ‘independent’ Bank of England in this matter, although he admits it is no coincidence that such measures are being considered on the heels of Stamp Duty increases and changes to mortgage interest tax relief.
It seems clear that the government and its fiscal power is being brought to play to dampen down what is perceived by them to be an overheating residential property market. Other restrictions being suggested include: limiting the percentage of buy-to-let mortgages for each lender, tightening the terms of such mortgages or forcing lenders to use more capital for the loans.
On the up-side, property still remains the best investment in the UK, over the past 5, 10 and 20 years, outstripping gold, stocks and shares and other investments, so it is no surprise that many landlords are swallowing the changes and continuing to invest!
For more information or to speak to a mortgage advisor, contact us on 01628 507477.
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