Buy-to-let borrowing falls ahead of imminent changes to tax relief on mortgage interest

Buy-to-let borrowing falls ahead of imminent changes to tax relief on mortgage interest


Purchase activity within the buy-to-let sector weakens, following a 3% hike to stamp duty and a reduction to tax relief rates, effective from April 1st



  • Buy-to-let borrowing falls from £1.4bn in 2016 to £800m
  • The decline in figures follows a 3% increase to stamp duty on buy-to-let properties
  • With a reduction to tax relief on mortgage interest due to come into effect next month, experts predict purchase activity within the sector will remain weak


The volume of loans for buy-to-let (BTL) purchases fell to an eight-month low in January, as a result of strict new measures enforced within the buy-to-let industry.

January figures from the Council of Mortgage Lenders (CML) revealed a significant drop in the amount would-be landlords borrowed to buy new homes, down from £1.4bn for the same period of the previous year, to just £800m

The number of people taking out mortgages on BTL properties also fell to 5,900, compared to 9,700 in January 2016. In contrast, remortgage lending reached its highest levels since November 2016 and accounted for two-thirds of total lending.

This decline in BTL borrowing follows a 3% increase to stamp duty on buy-to-let homes, and the announcement of a scale back to tax relief rates for landlords claiming interest rate relief on mortgage payments.

Coming into effect next month, the scaling back of tax relief on mortgage interest will see rates gradually reduced from 45% to 20%. This, combined with recent powers granted to the Bank of England in regards to the overseeing of the buy-to-let sector, will make it far more difficult for buy-to-let landlords to get a mortgage and will, as result, further slow activity levels within the sector.

Paul Smee, Director General of the Council of Mortgage Lenders, commented: “Buy-to-let house purchase activity continues to be weak, despite strong buy-to-let remortgage levels. This will likely remain so going forward as lenders tighten affordability criteria ahead of the PRA mandated stress tests and the introduction of tax changes in April.”

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