Taylor Scott International News
Over half of buy to let mortgage applicants in the UK are unaware of forthcoming changes to mortgage tax rules and other changes that could affect their application, a new survey has found. Indeed, it is accidental landlords, those who did not intentionally set out to rent out a property, are least likely to know about these regulatory changes, according to the research from landlord insurance provider Direct Line for Business. It found that 62% of applicants were unaware of either the changes to mortgage tax relief or the European Union’s Mortgage Credit Directive (MCD), both of which could impact their ability to secure a mortgage. This lack of awareness rises to 71% amongst accidental landlords. This comes as it is estimated that accidental landlords account for around 17% of new mortgage applications, with overall buy to let mortgage applications growing by 29% in the past year. The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy to let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as consumer lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests. Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy to let property will pay an extra 3% stamp duty. ‘The new EU legislation on mortgages coupled with the Government’s increase in buy to let taxation could significantly alter the buy to let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord,’ said Nick Breton, head of Direct Line for Business. ‘With house prices in the UK rising by 7% in the year leading to October 2015, and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city,’ he added. The firm urges landlords to make the most of existing tax benefits. Any money spent on keeping a property in a good state of repair is tax deductible, as are all broker and arrangement fees. Landlords can also claim the whole cost of council tax or utility bills that a tenant would pay. It also says they should keep up to… Taylor Scott International
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