Opinion  

Buy-to-let investors have got a cheek

Buy-to-let investors have got a cheek

A campaign to preserve tax benefits for buy-to-let landlords is well under way.

Until now, generous tax breaks including the 10 per cent wear and tear allowance – whether or not improvements are made to the property – and tax relief on mortgage interest have handed landlords the near-certainty of profits.

From April, they will have to prove they have spent money, and by 2020 interest tax relief will be reduced.

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Pressure groups are pushing out data designed to convince politicians and opinion-formers that the changes could spell disaster for the sector.

They argue that some landlords will no longer make a profit from their rental incomes, especially if interest rates rise.

Guess what? If I borrowed money to invest in an Isa or pension, then I would not make a profit from the income either once I had paid the interest on the loan.

Why should landlords be immune from the rules governing businesses and investments – that is, that you are not guaranteed to make a profits.

In a nutshell, they have paid tiny amounts of interest and enjoyed lavish tax perks on what can be a highly-geared and lucrative investment thanks to rising property prices.

The facts surrounding buy-to-let do not suggest a market under pressure.

The Council of Mortgage Lenders says almost a fifth of home loans in July – the month the chancellor made his announcement – were to landlords.

Buy-to-let lending grew by 33 per cent year-on-year to stand at £1.6bn. Brokers report that there has been no let up in demand.

The Bank of England says the number of buy-to-let loans has increased by more than 40 per cent since the 2008 banking crisis, while owner-occupied lending increased by 2 per cent.

Such has been the rush to invest that the Bank has warned it could amplify a boom/bust cycle.

Lenders do not seem to fear the future. There are 1,100 buy-to-let mortgages – the highest number since 2008.

The cost of five-year loans to landlords has fallen to 4.08 per cent according to Moneyfacts. First-time buyers have to pay an average 4.9 per cent for a similar deal – and they do not get tax relief.

A recent analysis by the CML confirms just how heavily buy-to-let landlords are treading on the toes of first-time buyers. More than two-thirds of the property they buy are flats or terraced houses.

Other data suggest that half of new homes built between 1986 and 2012 are owned by landlords.

There would be nothing wrong with this if they were on a level playing field, but this has not been the case.

The chancellor’s tax changes will remove some of the tilt, and no heed should be paid to any campaign to undermine them.

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Haggling with Admiral for yet another year

It is that time of year when I spend 15 minutes negotiating with Admiral over my car insurance. This year I brought a quotation of £1,162.80 down to £821.86 – saving £340.94.