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BUDGET 2015: Whittaker backs BTL measures

Mortgage Introducer

July 10, 2015

The Mortgages for Business and Keystone managing director agreed with George Osborne that the rise of buy-to-let isn’t good for financial stability and he said the Chancellor’s move will help even the odds with the first-time buyers market.

Buy-to-let loans accounted for 18% of all mortgages in the first quarter of 2015, the Council of Mortgage Lenders found.

Whittaker said: “It’s only fair to acknowledge that the Chancellor was right when he said the rise in buy-to-let is not necessarily good for the country’s financial stability.

“There are no two ways about it. Given limited stock, investors seeking decent returns are pricing first-time buyers out of the market and tipping the scales against them.

“The changes in buy-to-let mortgage interest relief from 2017 could help even the odds facing those trying to get a foot on the property ladder.”

However he reckoned some landlords will start borrowing from limited companies instead, especially as the Chancellor announced that corporation tax will be reduced to 19% from 2017 and 18% from 2020.

Whittaker added: “While some landlords may choose to leave the sector, it is more likely that this will lead to an increase in landlords borrowing via limited companies, where the interest can still be offset.

“Buy-to-let products for limited companies cost more – and there are fewer of them. As demand increases, lenders will have to step up, which will require training underwriters to deal with these more complicated applications.”

The government also announced that from April 2016 the ‘wear and tear allowance’, which allows landlords to reduce the tax they pay regardless of whether they replace furnishings in their property, will be replaced by a new system where they can only get tax relief when they replace furnishings.

Whittaker was critical of Right to Buy, which he called a “sticking plaster solution” to the UK’s housing shortage. He also reiterated calls for fresh housebuilding measures.

Today the government will announce further planning reforms which he said could prove critical.

He said: “To look on the bright side the budget didn’t contain anything on rent controls. And tenancy controls weren’t in there either.

“Both were mooted by Labour at the general election. It was widely expected that George Osborne would spurn price caps on rent, but the idea of some state control over landlords proved popular for Labour on the election campaign trail and a few pundits were expecting the Chancellor to announce something in this area.

“That George Osborne hasn’t given in to that sort of pressure represents a victory for common sense: in most of the places rent or tenancy controls have been applied, New York for example, they have failed miserably and actually ended up negatively impacting on the tenant.

“The very fact I’m lauding the Chancellor for not doing something shows how little there is to be pleased about in this Budget – but before the private rented sector slams the Chancellor for slashing landlord mortgage interest relief, we should take a moment to remember how bad this could have been had Ed Balls been standing at the dispatch box.”


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