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Reducing Buy-to-Let Investment Will Harm Tenants, Warns Report
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Introducing measures to reduce the amount of investment in the private rental sector will only increase rent prices and harm tenants, warns a new report from the Intermediary Mortgage Lenders Association (IMLA).
Reducing Buy-to-Let Investment Will Harm Tenants, Warns ReportLenders Association (IMLA).
The study, entitled Segmenting the UK Mortgage Market, assesses key issues facing the main sectors of the mortgage market. The market divisions are: First time buyers, moving homeowners, buy-to-let investors, lifetime borrowers, remortgagers and further advances.
Analysing the possible effect of the buy-to-let tax changes announced in the summer Budget, the IMLA says the reduction in mortgage interest tax relief will push some landlords into making losses after tax and raise the effective tax rate on their investment above 100%.
The IMLA argues that this may switch the market in favour of owner-occupiers by cutting the price that landlords are willing to pay for a property.
However, the risk of these changes, and therefore greater buy-to-let mortgage regulation, is the reduced supply of available rental homes at a time when the population is growing and low housing supply is fuelling demand in the private rental sector. The IMLA also believes that institutional investment will not make up the difference.
The IMLA research reveals that total lending across the whole mortgage market this year was below its 2014 level for January to May. Since, there has been a sharp improvement, suggesting that 2015 will end up being a reflection of 2014.
The strongest recovery was in the buy-to-let sector. However, when compared to recent years, this is unsurprising. Between 2007-09, the market saw an 81% decrease. This compares with a 60% fall in remortgaging, 56% decrease in activity by home movers and 53% drop amongst first time buyers over the same period.
Buy-to-let lending levels remained 40% below the 2007 record in 2014. The IMLA believes that the market is responding to, rather than fuelling growth, in tenant demand.
