Details of the Bank of England’s statement outlining tougher rules on mortgage lending to buy to let investors have been shown to admit that the three per cent stamp duty surcharge will be a “considerable” burden on landlords.
Last week the BoE’s Prudential Regulation Authority revealed details of how it expected buy to let mortgage lenders to tighten their criteria.
This included taking more of a borrower’s personal and professional taxation and salary elements into consideration, and ‘stress testing’ applicants to see how they would meet mortgage debt - through rent and other means - if interest rates moved up from their current historic lows to a notional level of 5.5 per cent.
Now further analysis of the paperwork sent to individual lenders reveals for the first time some official acknowledgement that the arrival, last April, of the additional stamp duty three per cent surcharge would hit the sector.
In section 2.40 of the PRA’s statement it says: “The PRA also considered the impact that the personal tax changes would have on landlords, and particularly those landlords using their personal income to supplement the rent. For portfolio landlords, who are not set up as limited companies, this additional tax burden will be considerable and so a portfolio view becomes even more relevant for new borrowing.”
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The Government is creating its own housing crisis unless it repeals George Osborne's draconian tax increases on the letting industry pretty quickly. BTL Investors just won't be taking the plunge investing in unprofitable ventures.
And this morning the RICS have said that by 2025 there will be 1.8m new renters in the market which is 200000 a year EVERY year and what is our elected dictatorship doing about it? Strangling the BTL sector and putting an insignificant amount of money into house building which will hardly scratch the surface. RIP the BTL expansion of landlord portfolios.
The Autumn Statement or Budget 2017 is going to be a VERY interesting one for investors. (Not that I have any inside information, just guessing!)
The increase in stamp duty is not just for BTL. Our investors buy ready tenanted houses where the tenancy has existed for decades, this does not help first time buyers as obviously they would not be buying these houses. Tenants who are put on Universal are a problem not taken into account by the government. Landlords are reluctant to invest and we manage excellent landlords. The government is oblivious of so many aspects of housing and the difficulty tenants and landlords are having.
The homeless situation is well beyond any sort of control already. Look at the extraordinary situation in Peterborough were 74 families are being evicted so their homes can be made hostels for the homeless!
Through Osborne's tax grab (or is it just incompetence) rents are set to rise through the roof and it'll hit the lowest income families hardest of all. In a few years time we'll have shanty towns and worse. Probably a good time to buy shares in hotels like Travelodge!
As always Central Govt make the policies but expect Local Govt to clear up the mess on ever-tightening budgets.
The Peterborough situation does our industry image no good. The "corporate" owners are evicting good Tenants to get temporary homeless at 3/4 times the rent
The runaway train that is the UK housing crisis is heading for the buffers and all the Government is doing do is stepping on the gas (and a bit of tinkering around the edges), whilst spin the whole thing to make good headlines, and using the PRS as scapegoats.
Reality will dawn, but will the Government realise this in time?
Author appears not to understand what he is writing about.
section 2.40 of the PRA’s statement is referring to Section 24 of the Finance Act 20015 (which prevents landlords from deducting their mortgage costs when calculating profit), not the 3% stamp duty on second home purchase.
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