With details of planning changes deferred until Friday, yesterday’s budget delivers significant changes to tax relief for buy-to-let mortgages and also support for mortgage interest payments.
Given the lack of prior consultation on either measure, it is a relief that the timescales leave room for lenders and borrowers to adapt.
Reducing landlords’ mortgage tax relief is likely to prove a populist measure but the idea that tax benefits have been a big driver for growth in the private rental sector is flawed.
Unlike homeowners, private landlords are still subject both to capital gains tax and tax on rental income, subject to allowable deductions for most costs.
It also overlooks the fact that two in three properties entering the private rental sector since 2007 have done so without the support of buy-to-let mortgages.
Anyone expecting this change to result in a great levelling of the playing field in the housing market is destined to be disappointed.
Following comments from the Bank of England last week, it is also a worrying sign of the growing trend to talk down buy-to-let and the private rental sector, rather than address the chronic lack of housing that is putting such pressure on first time buyers as the UK population grows.
The fact the government will only provide SMI payments as loans from 2018 shows it wants homeowners to stand on their own two feet financially.
But with rates certain to rise by then, the move is likely to increase the pressure on those households who are already the most vulnerable.
Presumably government will provide the new SMI loans rather than expecting lenders to do so.
But it remains to be seen what further steps will be taken in the meantime to create a fairer housing market that puts less pressure on individuals’ household finances.
