UK buy to let landlords could face tougher lending conditions, it is suggested

Taylor Scott International News

There is concern that buy to let landlords in the UK will face tougher lending conditions on top of tax relief changes already scheduled for next year. One lender, the Nationwide Building Society is already cracking down on rental calculations and cutting back its maximum loan to value for landlords over worries about the tax relief changes next year.~ Nationwide's Mortgage Works, the mutual's buy to let arm, which provides one in seven loans to landlords, is increasing rental cover requirements from 125% to 145% and cutting its maximum LTV from 80% to 75% from 11 May 2016. According to Armistead Property more lenders may follow suit and while the changes facing buy to let landlords, on top of the recent extra stamp duty payable on additional homes, can be taken into account landlords need to plan ahead. Currently, landlords can claim tax relief on monthly interest repayments at the top level of tax they pay of up to 45%. However, the Chancellor’s new tax rules could mean that thousands of buy to let landlords will see their profits hit as the amount they can claim as relief will be set at the basic rate of tax which is currently 20%. Some current basic rate taxpayers will also be hit, because the change will push them into the higher rate tax bracket. It will be phased in over a four year period from April 2017. However, the firm believes that the tougher lending criteria and recent tax hikes, will not have a major impact on the property market as a whole. ‘This move by Nationwide could trigger other big lenders to follow suit. The banks seem to believe that the Chancellor’s tax crackdown on mortgage tax relief will could cause difficulties for landlords. Though the new tax rules are challenging for most landlords, rising asset values and rental income will go a long way to protect profits,’ said Peter Armistead. ‘Landlords have plenty of options available that will help offset the increased taxation. The first thing landlords should do is carry out a serious portfolio review and work out how the tax changes and tougher mortgage lending will affect them and what options there are to save, or make more money. For example, mortgaging to get a better deal, renovating some old stock as these costs will be tax deductible, selling some properties or increasing the rent,’ said Peter Armistead. ‘Landlords need to think outside the box and ask themselves questions like can I buy with cash or with far less leverage, should I incorporate, can I change a house into an HMO and increase the rental income, can I get planning on an existing property to increase its value or can I add an extension, or convert the cellar?’ he pointed out. ‘Although the government is trying to curb the buy to let market, property investment is robust in the long term. It is estimated that two million Britons are now private landlords… Taylor Scott International

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