Tougher times on the horizon for buy-to-let landlords

Many buy-to-let landlords were expecting business to get significantly more challenging come April, with new stamp duty hikes and tax relief changes, but it seems the challenges have arrived sooner than expected with Barclays introducing stricter affordability checks on aspiring landlords several months before the Government changes come into effect.

Buy-to-let landlords have received significant warning that things will become tougher, but many are claiming that the Government’s bid to put the brakes on the currently booming buy-to-let market will make life increasingly more difficult for tenants as well as landlords, as changes to tax relief force landlords to pass rising costs on to their tenants.  Many landlords are tightening their belts in an attempt to weather the storm, while others have been left feeling that the benefits no longer justify the demands of buy-to-let investment.

Landlords hoping to secure a new buy-to-let mortgage from Barclays will now have to prove that their rental income will be equal to at least 135 per cent of their monthly repayments, in order to ensure the mortgage repayments remain affordable once tax relief changes are imposed in April of this year.  Experts are suggesting that other lenders will soon follow in Barclays’ footsteps, and with rising property prices already an issue for both owner-occupier and buy-to-let purchasers, buy-to-let investment will simply be out of reach for many aspiring landlords.

According to the Bank of England, buy-to-let lending has increased by more than 300 per cent over the last decade, but it appears Britain’s love affair with buy-to-let property may be over for all but the most serious of investors.

Danny Luke, Managing Director of one of the UK’s largest independent property companies – Quick Move now, explains: “Buy-to-let has become increasingly challenging in recent years.  As a nation, home ownership is still out of reach for a significant portion of the population, so a vibrant and efficient rental property market is much needed.  Government changes aim to damped the buy-to-let market, which they fear is blocking first time buyers from being able to secure affordable housing, but if they push too much harder they may simply exacerbate the housing crises by making private rental property as unaffordable as property ownership.  Potential first time buyers struggle to secure the large deposits required to buy a property, but for those who are fortunate enough to be able to save up the necessary deposit, monthly mortgage payments are now lower than rents for the same level of housing in every area of the UK.  Squeezing buy-to-let landlords financially may well push those rental costs further still, giving would-be home owners even less chance of being able to save the thousands of pounds required to get a foot on the property ladder.”