Buy-to-Let Landlords Owe Equivalent of Hong Kong Economy in Mortgages
British buy-to-let landlords owe over £200 billion in mortgage repayments, equivalent to the size of the Hong Kong economy, says the Council of Mortgage Lenders (CML).
The CML’s report states that changes, such as Chancellor George Osborne’s proposal to cut landlord tax relief and an expected interest rate rise, are currently causing “considerable uncertainty” in the sector.
Buy-to-Let Landlords Owe Equivalent of Hong Kong Economy in Mortgages
The CML has urged ministers to consider the effect of these plans on the wider economy and indicates that rent rises are likely, as landlords attempt to recover lost income.
The report says: “The Chancellor’s announcement of tax changes affecting buy-to-let landlords, which are being introduced over a five-year implementation period, has created another source of uncertainty for landlords, tenants and lenders.
“The measures are likely to deter some landlords from expanding their portfolios, and may encourage others to reduce their property holdings. They could also lead landlords to seek to increase rents to cover some of their additional tax liabilities. Overall, the extent to which the measures may discourage future growth of buy-to-let and the private rented sector is unclear.”
It continues: “Over the last 15 years or so, buy-to-let has made an important contribution to the expansion of the private rented sector, helping to reverse many decades of decline.
“Currently, however, there is considerable uncertainty over the impact of a series of regulatory and fiscal proposals on both buy-to-let and the private rented sector.
“We have, however, already urged the Treasury to take into account the effect of tax changes in finalising its proposals to reform macro-prudential powers.”1
The CML report also reveals that the private rental sector has doubled in size over the last 12 years, following decades of decline.
Of all buy-to-let mortgages granted in the UK, 24% are for properties in London, compared to just 13% of all owner-occupied mortgages being issued in the capital.
The figures show that landlords favour certain types of properties, with 36% of loans for flats and 34% for terraced houses. This trend is even more marked in London, with flats accounting for almost two-thirds of buy-to-let purchases.
The CML also found that the sector witnessed a stronger recovery than the wider market following the financial crisis, with buy-to-let lending reaching £27 billion last year, after a low of £9 billion in 2009.
At present, there are around 1,100 buy-to-let mortgage products on the market, the highest number since April 2008.