According to some commentators, obtaining a buy-to-let mortgage in Britain just got that little bit harder with the government’s announcement of its plan to instigate a clampdown by raising stamp duty by an extra three percent. And the Bank of England seems to think that the move, along with several other measures targeted at the buy-to-let market, will work, predicting that it “will lead to a decrease in the number of cumulative new approvals for buy-to-let mortgages by about 10 to 20 percent by the third quarter of 2018”.
One move, initiated by the Bank of England, will seek to ensure that lenders make more stringent assessments of whether landlords will receive enough rent to cover mortgage interest. Additionally, lenders will be obliged to take greater account of management costs together with the possible burden caused by future tax increases.
The moves comes as a response to the difficulties many would-be first-time buyers are experiencing in getting a foothold on the first rung of the property ladder, with chancellor George Osborne appearing to answer critics of current inequities by saying that “people buying a home to let should not be squeezing out families who can’t afford a home to buy”.
In the fifteen years since 2001 there has been a marked decline in the number of homes owned by families with a mortgage; in their stead a new class of buy-to-let landlords and small-time property investors has arisen; between 2007 and 2016 buy-to-let increased its representation in total mortgage lending by more than 100 percent while the number of people living in rented properties rose from 11.5 percent to 16.3 percent.
However, the good news for those looking to make the most of the buy-to-let mortgage market is that the impact of all the government’s changes should be only relatively minor – with the increase in stamp duty for buy-to-let investors unlikely to make much of a difference to would-be first-time buyers. In fact, some experts predict that prices may drop slightly as a result of the increased stamp duty, meaning that the impact on buy-to-letters will be negligible if it is felt at all – some might say it is just a lot of political noise.
Although the Bank of England might claim to be taking a stricter stance, around 75 percent of its loans already meet its new borrowing standards and it has admitted that it still expects the buy-to-let market to grow by 17 percent a year.
However, this is not a view shared by everyone. For example, one mortgage broker told The Independent, “It is a worrying situation with echoes of 2014 when the Mortgage Market Review set down new affordability requirements. Back then, lenders interpreted the regulations in an overly cautious way, leading to some quite absurd decisions and refusals for borrowers who were plainly able to afford their mortgages. My concern is that this will happen again under the new proposals on buy-to-let.”
This, it seems, is a minority view; it is reasonable to forecast bright days ahead for buy-to-let investors, even if there has been some slight occlusion of what remain predominantly blue skies.