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BTL mortgage sector damaged by Osborne tax move - analyst

The specialist buy to let mortgage sector is set to be an unexpected victim of the buy to let tax changes announced by Chancellor George Osborne in his Budget.

Datamonitor, the independent business information and market analysis company, says that while BTL lending has been the main engine of growth in the UK mortgage market in recent years, that may change.

Last week Osborne announced that from 2017 he would start removing the right of landlords to claim more than the basic rate tax equivalent in relief for mortgage interest, and is this year tightening the rules about claiming for wear and tear by allowing claims only for money spent rather than the annual 10 per cent of rental currently allowed automatically.

Bodies ranging from landlords’ organisations to the Institute for Fiscal Studies have criticised the measures and now Datamonitor analyst Daoud Fakhri says annual profits from a typical rental property “could more than halve.” 

He says that high levels of buy to let lending pose a risk to the wider market, so mainstream mortgage lenders may indirectly benefit from increased stability. But he warns that “lenders that specialize in buy-to-let will not fare so well.” 

He warns that “their expected profits will have been based on projected growth rates that will now not be realized due to falling demand. To keep their shareholders happy, they must consider diversifying into other sectors such as non-standard mortgages and crowdfunding.”

  • Felicity Blair

    The growth rates had to stabilise at some point though for BTL lending, it was starting to spiral out of control. We all knew something would have to give at Osborne's Budget.

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