Mortgaged buy-to-let landlords are finding ways to weather the impact of regulatory changes that have dampened the investment climate.
A YouGov survey of 925 mortgaged buy-to-let landlords revealed they were taking a long-term view of their property investments as they face up to the impact of reduced mortgage interest tax relief, new mortgage regulations from the Prudential Regulation Authority (PRA) and 3 per cent stamp duty.
The Council of Mortgage Lenders has reported more than two-thirds were aware that the ability to deduct mortgage interest will be gradually phased down for landlords so that by 2020 only 20 per cent of any landlord’s mortgage interest will be tax-deductible.
High-income landlords polled by YouGov in December 2016 and January 2017 were more likely to be anticipating the change to tax relief, with more than 80 per cent of those earning more than £100,000 per year reporting awareness of the measure.
Around 30 per cent of those polled said the changes would not affect them – and experts claimed this was not necessarily a sign of complacency, as a number of groups, such as those that operate their lettings through a corporate structure, will be unaffected.
Raising rent was the most commonly cited plan to reduce tax bills, with 19 per cent saying they would definitely do this and 5 per cent saying they had already done so.
About one in four intend to undertake more frequent rent reviews.
While only 45 per cent of the landlords sampled by YouGov were aware of the new PRA requirements that new buy-to-let mortgage applications be subject to a stressed interest cover ratio test, the survey revealed it was not an issue for most landlords.
Nearly 80 per cent of respondents said they could manage an interest rate increase of 1.5 percentage points over the next three years.
In addition, around 70 per cent of buy-to-let landlords were aware of additional stamp duty for second and subsequent homes, which was introduced last year.
Ian Ward, managing director of The Mortgage Partnership, said: “Our experience has tended to reflect the overall findings of the survey on the surface.
“However, in the real world while landlords have a basic understanding of most of the issues, they are still needing reassurance and a deeper explanation of some of the ramifications. This is particularly evident when looking forward.
“The PRA rules on stress testing were the least understood. Landlords with portfolios were also largely unaware of the treatment of new purchases, which will take into account affordability in relation to their existing property holdings.”
simon.allin@ft.com
