The future of buy to let is uncertain for property investors due to concerns about tighter borrowing controls and changes to landlord taxes, according to lender trade body The Council of Mortgage lenders.

Publishing a new study releasing a stack of new data about buy to let for the first time, the CML voiced the fears of banks and building societies about how the market may develop in the future.

Although the lenders signed up to the CML represent more than 90% of the buy to let mortgage market, the statistics reveal that the expected advance of £33 billion to landlords this year is far from lending levels of the property bonanza prior to the credit crisis.

The peak market in 2007 saw landlords borrow £46 billion.

The CML argues this is likely to slow down as the market is gripped by uncertainty over new proposals to shackle how much banks and building societies can lend property investors and the shadow cast by Chancellor George Osborne’s announcement of new landlord taxes.

The three main worries for lenders and landlords are:

  • Proposals to give the Bank of England powers to limit loan to value and debt to income ratios for buy to let borrowers as a tool to control risks of an overheating property market
  • The imposition of the European Mortgage Directive from March 21, 2016 that creates ‘consumer landlords’ and restricts their borrowing.

The description of a consumer landlord includes new landlords, those letting a former home to move on and property investors inheriting homes. Their buy to let borrowing will depend on their ability to repay loans from income rather than rents generated from their investments

  • Increased taxes for landlords paying higher and additional rate tax who will lose up to half of relief that allows them to offset mortgage interest against rents

 “Although social and economic factors support further growth in the market, the medium to ln term prospects for buy to let are less certain,” said the CML report.

“New regulations and changes to how landlords are taxed are likely to affect future demand for borrowing.”

More about the CML study and buy to let borrowing.

Read the full CML report ‘Buy-to-let: the past is no guide to the future’

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