TSLE16: Buy-to-let product innovation to emerge from tax pressures
02-01-2016
Speaking at The Specialist Lending Event in London, Hall said the 3% Stamp Duty Land Tax (SDLT) premium which will be imposed on people purchasing a buy-to-let property or second home from 1 April is likely to prompt lenders to offer cashback mortgages offering the equivalent sum to soften the blow.
Product innovation is also expected to emerge as a result of the reduction in tax relief which landlords are allowed to claim.
From April 2017, the government will begin to phase out the higher rate tax relief gradually over a period of four years. Those who have a buy-to-let property will no longer be able to claim 45% tax relief on their monthly payments, instead they will only be able to claim the basic rate of 20%.
Hall said this change may prompt lenders to increase the arrangement fee on mortgage products, while lowering the interest rate of the mortgage which would better suit the commercial needs of landlords. “The arrangement is a finance cost which can be taken off a tax return,” said Hall.
Investors, said Hall, will also evolve under the new tax regimes. “Investors are canny,” he said. “If they are buying a property and they have an additional 3% slab levy on a purchase, trust me, as sure as night follows day, an investor will be buying a property and saying to an estate agent I’m buying this an investor and I want a 3% reduction off the purchase price.”
The government’s consultation on how the 3% SDLT will be applied is set to close on 1 February. For a breakdown of the points under consideration and proposed exemptions, read Hannah Uttley’s Eight things you need to know about the Stamp Duty consultation.