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Budget delivers a ‘serious blow’ for landlords

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Buy-to-let landlords will struggle with new restrictions introduced in George Osborne’s Budget yesterday, a commentator has warned.

Chancellor Osborne delivered his Budget statement to the House of Commons yesterday and included a new measure which limits the tax relief given to landlords.

At present buy-to-let landlords can offset mortgage interest payments against their income but under new plans the amount of tax relief will be capped at the base rate of 20%.

Andy Knee, chief executive of LMS, said this represented a big change for many landlords but that the wider market may benefit.

“The restriction to buy-to-let tax relief is a serious blow for landlords, which is likely to reduce their appetite for gearing within their portfolios,” he said.

“However, the move is likely to be welcomed by first-time buyers who may find securing their chosen property a little easier as a consequence. Rising house prices in London and the areas around the commuter belt have created a generation of squeezed renters, unable to save enough for a deposit on a first home, who find that limited housing stock, a falling turnover of homes, and competition from tax subsidised landlords has barred them from the market.”

Jane Guaschi, business manager at Direct Line for Business, said the move could also have repercussions for tenants.

“The reduction of mortgage tax relief for owners of buy-to-let properties will have a significant impact on the income generated by landlords across the country,” she said.

“It may see landlords forced to increase rents for tenants, or to leave the market reducing the housing stock available for rent.  Landlords will also have fewer funds to invest in the upkeep of their properties.”

Knee added that more still needed to be done to address the housing crisis facing the nation.

“Reducing these subsidies won’t solve the housing crisis, but it does shift the playing field a little in favour of first-time buyers. Of course, landlords can reduce the impact of the Chancellor’s tax-grab by ensuring they have the most competitive mortgage deal on each and every property in their portfolio and this could lead to a remortgage bonanza for brokers and lenders alike.”

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