There has been a sharp fall in new investments in the buy-to-let market with a fall of £20 billion over the last two years having been recorded. This fall has resulted from both higher taxes and mortgage rules, reducing the attractiveness of the sector to landlords.
According to the IMLA (The Intermediary Mortgage Lending Association), new investments in the buy-to-let sector fell by 80% in the 2015 to 2017 period, resulting in a fall from £25 billion to £5 billion.
The introduction of two new measures, namely the stamp duty surcharge on additional properties and the removal of mortgage interest relief were largely responsible for the reduction in investment.
Adding further impetus to the reduction in investment is the new restrictions on lending for buy-to-let properties, initiated by the Prudential Regulation Authority at the end of 2017.
One positive aspect of the reduction in interest in the buy to let sector is that lenders have had to reduce rates on their mortgages in order to encourage customers, with Natwest among those who has reduced rates on buy-to-let mortgages.
The new environment means that, according to John Charcol, the mortgage broker, the average landlord will suffer a reduction in the amount they can borrow by £30,000 per property when compared with the amount they would have been able to borrow under the old rules.
In addition, landlords who own four or more properties are classed as "portfolio landlords" and are placed under an increased level of scrutiny when they need to refinance. This will lead to higher administrative complications and the possibility of being denied the loan.
It's possible that longer term fixed rate deals may become more popular due to the new rules, up from the current 2 year standard.
Some landlords who do not wish to leave the buy-to-let sector may decide that setting up limited companies is more advantageous, however, an increase in administrative burdens may put some investors off this option.
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Tax and mortgage crackdown cuts buy-to-let investment by 80pc