29^th Nov 2017

A recent analysis of the UK finance data, carried out by a major chain of estate agents, has brought to light that rented landlords are either paying down their mortgages or are selling up to leave the market, because of the raft of government regulatory and tax changes that have 'penalised' them.

The data reveals the number of outstanding buy-to-let mortgages is falling behind the number of new mortgages being granted and it shows that many loans are being paid off by landlords wishing to leave the sector.

The figures do not include remortgages and states that this year from April to June, 78,000 new buy-to-let mortgages were taken out, however during this period there was only an increase of mortgaged rental properties of just 28,000.

This is the biggest net difference (50,000) in a decade and this worrying trend started in 2016's third quarter, is the complete opposite of ten years.

Since the introduction of the 3% stamp duty surcharge, the phasing out of the mortgage interest tax relief and the PRA's (Prudential Regulation Authority) stricter criteria for buy-to let lending, it has been widely reported that 20% of private rented sector landlords were seriously considering selling up.

The increase the 0.25% increase in the base rate which was announced by the Bank of England on 2nd November, has further compounded the problems being faced by BTL investors and it is looking very likely that rents will be raised.

The estate agents predict that over the next five years there could be a major plummet in the number of BTL investors by as much as 27% from 75,000 down to 55,000 over the next five years.

Jane King, mortgage adviser of a London finance firm, commented: “It is exactly what is happening and what was expected. Under the new PRA rules, a lot of lenders are insisting that entire portfolios meet loan-to-value criteria, so if landlords have one property skewing the figures the only way is to pay down that mortgage into line.

“A lot of landlords are getting advice from accountants who are just saying 'pay them down'. Over the next two or three years there will be no advantage in having mortgage interest payments whatsoever, as they are not deductible any more.

“We are trying to remortgage a lot of them, but at the same time they are paying down a lot of it.
“Unless the government does something really drastic, it will continue. There are no new landlords in the market and rents are going up.”

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