Buy-to-let crackdown branded “ridiculous”
Multiple measures to curb buy-to-let have been branded “ridiculous” by a pressure group campaigning against the government’s decision to phase out tax relief for landlords.
Steve Bolton, founder of Platinum Property Partners and a co-leader of a judicial review against the government to reverse the proposed changes to mortgage interest tax relief said: “It is ridiculous the government has completely disregarded renters in their quest to get people on the property ladder.
“The amount people pay in rent directly impacts what they can save towards a deposit.”
The “Tenant Tax” campaign is currently fundraising to raise the additional £250,000 needed to progress in court.
Bolton added: “Many landlords’ profits will take a tumble once tax relief is phased out, yet they will now need more rental income to qualify for an affordable mortgage deal.
“This is bad news for landlords looking to remortgage or expand their property portfolio, and incredibly off-putting for those entering the market for the first time.
“With mounting cost pressures, some landlords will either have to sell-up (further reducing rental property supply) or put up rents to stay afloat.
“This time last year, tightening lending criteria would have been a good way of preventing the market from overheating.
“But after several blows for landlords, it will now be one more nail in the coffin for some. Reversing next April’s tax changes is the only way of ensuring the buy-to-let sector remains functional and affordable for both tenants and landlords.”
Last week Nationwide revealed The Mortgage Works was reducing its maximum loan-to-value on buy-to-let loans to 75% of a property’s value, instead of the current 80%.
Additionally, borrowers will have to prove that their rental income is at least 145% of their monthly mortgage payments, up from 125%.
In December Barclays also upped its rental ratio to 135% and a host of other lenders followed.
The changes come as the Prudential Regulation Authority published proposals to force lenders to tighten criteria for buy-to-let amid fears that the market is overheating.