Buy-to-let mortgages pulled at fastest rate since 2009
01-21-2017
Dramatic fall follows changes in tax regulations and tough new affordability tests from the Bank of England
Buy-to-let mortgages pulled at fastest rate since 2009
Buy-to-let mortgage offers have been pulled from the market at the fastest rate since the banking crisis, reports the Daily Telegraph.
A report from Moneyfacts shows the number of available buy-to-let mortgages has fallen from 1,482 to 1,408, "the largest drop in numerical terms since March 2009, when lenders drew back from the sector and concentrated instead on mainstream homeowner business", adds the paper.
Loans for those with 25 per cent deposits - "normally the smallest deposit lenders will accept" – have been hit hardest, falling from 606 to 540, more than ten per cent.
In part, the cuts are a response to the introduction of tighter Bank of England rules requiring lenders to apply new affordability tests based on hypothetical interest rates of up to 5.5 per cent.
As rents must now make up as much as £140 for every £100 of mortgage interest, up from £125 previously, landlords have to either take out smaller loans, requiring bigger deposits, or pass the cost on to their tenants
Designed to prevent a bubble in buy-to-let lending, the reforms also take into account the hit to landlords' profits from a series of tax changes. Stamp duty on second homes rose three per cent last year while the ten per cent flat rate tax break for property maintenance was removed.
From April, landlords will also lose tax relief on mortgage interest, which will be reduced to the base income tax rate, which is 20 per cent, doubling bills for higher-rate taxpayers and dragging more into the tax bracket.
Landlords say it could leave them paying hefty taxes despite making a loss.
However, many argue the reforms level the playing field for hard-pressed first-time buyers.
Moneyfacts' Charlotte Nelson said: "Lenders appear to be withdrawing products to get back to just a 'core' range in an attempt to wait and see what other providers will be doing in the run-up to April."