The Government attack on the buy-to-let sector could force landlords to put their rents up by 30%, believes a former Bank of England (BoE) Monetary Policy Committee member.
David Miles, a professor of financial economics at Imperial College London, spoke at the Paragon Great Buy-to-Let Debate in London.
He believes that house-price linked mortgages could help lenders address the balance of solvency and enable more buyers to get onto the property ladder.
Miles said that the Bank is aware of tensions of keeping financial institution solvent and making mortgages available so that buyers can get onto the property ladder at a younger age.
He does not believe that the Government attack on the buy-to-let sector will make it easier for people to buy their own homes.
“Changes in buy-to-let were justified as a move in the direction of removing distortion against owner-occupiers,” he stated. “This is patent nonsense.”
Miles predicted that if landlords are forced to increase their rents to mitigate the additional Stamp Duty they now have to pay and higher costs as a result of the reduction in tax relief on finance costs, tenants could end up paying 20% to 30% extra in rent.
He insisted that the Government and regulators will have to accept that house prices continue to rise above earnings, but suggested that house price index loans could help to tackle this.
“House price index loans may be more attractive where the amount you pay fluctuates in line with what happens to the value of the property,” he said. “That becomes more attractive if you are in a world of persistently high prices to income.”
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