Does a month ever pass by when Chancellor George Osborne does not make an unexpected announcement concerning the topic of buy-to-let landlords? Who does not remember the changes that were made to the mortgage interest relief in order to please the high-end taxpayers? Well this time he comes back with another surprise proposal: that of increasing the stamp duty land tax that is payable on a second home or investment property. All one can do is to wait and watch what the Bank of England’s Financial Policy Committee is going to do once this proposal has been ratified and its powers of directing the buy-to-let market changes.
Now I am not worried in the least about this kind of intervention, but let us be a bit realistic and shift the focus for the moment. Just about how many people do you know who talk about the growing market of buy-to-let gross mortgage lending? Many, I would bet. Now what if I tell you that the majority of these people (as much as 60%) are concerned only with how to refinance existing mortgages? As you can see, these people won’t be as much affected with this stamp duty tax changes as you think; after all, stamp duty is applicable only for purchases!
Believe it or not, at least 15% of the total stock mortgages in UK consists of nothing except buy-to-let, and if the base price starts increasing then it would still need to be refinanced. The ones who would be affected the most by these changes are future landlords who would think twice before making purchases. If you ask me however, I don’t see it this as something to be worried about. Realistically speaking, a typical landlord is usually in the business for long term and has multiple properties too! That is not to say that most of these landlords would be overly happy with these changes; they won’t but at the same time, there is a silver lining in the cloud too as the proposed changes would diminish the number of speculative landlords in this game.
In fact I would go to the extent of defending the Bank of England Stability Report as I find it to be totally sensible and logical. Another thing that makes me glad is that the FPC won’t take any action without waiting and seeing what the snowballing effects of these taxation changes are going to be!