CML warns Treasury of buy-to-let overkill

CML warns Treasury of buy-to-let overkill

The Council of Mortgage Lenders has warned HM Treasury of the risk of “overkill” in its attempts to dampen interest in the buy-to-let market.

In response to the consultation on the proposed 3 per cent stamp duty surcharge on second homes, the CML said the government runs the risk of stopping the flow of private rented property without any corresponding increase in the ability of households to become home-owners.

The trade body also warned of the fact the surcharge could lead to landlords charging higher rents, thus making it harder for existing tenants trying to save for a deposit.

Paul Smee, director general of the CML, also raised concerns about the fact people may have to pay the added stamp duty on their main property if there is a short overlap between buying their new home and selling their old one, with homeowners then having to claim the money back.

He said: “Our longstanding view is that stamp duty is a blunt policy lever.

“Given the complexity of the proposals, we also suspect that in practical terms the surcharge could cause more problems than it solves.

“We urge the government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category.

“If the surcharge proposal is designed to promote home ownership, we think that there should be better evidence as to why this requires a reversal of growth in the private rented sector.”

Mr Smee said the government should also clarify whether its policy intention is to favour institutions facilitating new-build activity, or new-build activity more generally, warning against discrimination towards small-scale and individual investors.

In the Autumn Statement, chancellor George Osborne announced a new rate of stamp duty that will see buy-to-let investors and owners of second homes pay 3 per cent more from this April.

The government will also restrict mortgage interest relief on residential property to the basic rate of income tax from April 2017.

Last month the CML warned buy-to-let faces a “challenging period” and predicted buy-to-let house purchase activity may peak and fall away below 2014 levels by 2017.

Guy Meacock, head of the London office of buying agency Prime Purchase, said: “The stamp duty changes announced in the Autumn Statement will give a bit of a kick to the buy-to-let and second home market in the spring as buyers try to avoid the higher stamp duty from 1 April.

“There is a growing concern that if you do have money to spare, where do you put it?

“With it taking six weeks, on average, from exchange to completion, buyers will need to have exchanged by mid-February if they want to complete before 1 April, which doesn’t leave much time.”

HM Treasury’s consultation closes on Monday (1 February).