Tax changes signal first-time buyer boost

In an attempt to “level the playing field between first-time buyers and investors”, Chancellor George Osborne announced in his summer budget that landlords would no longer receive tax relief on their mortgage payments at the rate of 45%, dropping instead to the basic rate of 20%. Due to be phased in over four years from April 2017, the move is a response to a closely monitored buy-to-let sector that now accounts for 15% of mortgages taken out in 2015. The Government’s budget document also explains the changes, stating that the ‘current tax system supports landlords over and above homeowners”.

One of the big concerns is that landlords will pass the additional costs onto tenants, increasing rental prices in an already expensive climate. There is also disapproval from the real estate sector, whom warn of the damaging effect this may have on housing supply. Data from the Department of Communities and Local Government reveals that 57% of the increase in housing stock between 1986 and 2012 was accounted for by private rented accommodation, demonstrating the importance of the small, private landlord to UK housing.

But Paul Smee, Director General of the Council of Mortgage Lenders, is positive that the gradual phasing in of the changes will help: “A four-year timetable does at least reduce the risk of sudden market shocks”. The tax changes could also make it easier for those renting to achieve homebuyer status as more properties become available as landlords step away from investing. By shrinking the gap between supply and demand, the changes could also result in reduced house prices