Vince Cable backs BTL crackdown
Speaking at the Association of Short Term Lenders Conference 2015, the former secretary of state for business, innovation and skills admitted he shared the Financial Policy Committee’s sentiment that too much buy-to-let represents a risk to the stability of the housing market.
From 2017 to 2020 the amount of buy-to-let tax relief landlords can claim back will be cut from 45% to 20% for top rate taxpayers.
Cable said: “I think my former colleague George Osborne has done the right thing which is to tighten up tax relief. There is absolutely no justification for giving preferential tax treatment to borrowing for buy-to-let as opposed to borrowing for other forms of investment.
“It’s now as you know being reduced to the standard rate. I would be surprised if they don’t tighten it up further.”
He added: “The returns on buy-to-let over the last five years relative to investing in equities are staggeringly high which is an obviously inducement to get into it.
“I do share some of the concerns from the FPC about the potential risks to the sector because if we do get a downturn in the housing market those guys are heavily exposed and if we get an upward movement in interest rates many of them are very highly geared so you can see the problems coming down the track.”
It was a cautious speech by Cable, who warned against global risks in China, raising interest rates too early, the Conservatives’ reintroduction of right to buy and the “abnormal” state of monetary policy.
He added: “What we had in 2008 was the economic equivalent of a heart attack.
“What happened in 2008 had serious consequences and the legacy of those is still with us in monetary policy.”