How will George Osbourne’s Autumn Statement affect the buy-to-let mortgage market?

by Darwin on December 10, 2015

In the Autumn Statement for 2015, George Osborne announced a new tax regime for people in the Buy-To-Let market in Britain. This dealt a big blow to the income of many middle class families and further pushed back the actualisation of retirement dreams for a number of individuals.

Amateur landlords and second home owners were shocked by the Chancellor’s new position as they face a raise in their stamp duty tax rates over the coming months.

With this new regime, individuals looking to buy a £200,000 home will have to pay a massive £7,500 in tax costs. This is a 500% hike from the £1,500 being paid today by many who are mainly looking for a stable source of income who are looking

Known as the 3 per cent stamp duty surcharge, it will kick in from February 2016 and will help pull in over a billion pounds for the treasury.

Interestingly, the extremely rich investors who own at least 15 properties are exempted from this additional charge. This has been deemed a direct blow to those who are attempting to enter the property market and build their own portfolios.  While the Chancellor has continued consultations on more exemptions for such owners, critics have called the news catastrophic for the private rental sector.  The extent of the blow is magnified by the fact that tax incentives for small landlords were cut in the emergency summer budget of July.

It is only a matter of time before we see a rise in rents for tenants. Landlords have been forced into a position whereby they are expected to calculate mortgage and rental rates to a level of detail that has never been expected of them until now.

The recent changes from Mr Osborne suggests that he is erecting barriers around the property market. The likely result of this will be less people attempting to move into the property market as a means of setting up a retirement plan.  It bodes well for institutional investors however, as the Chancellor has shown willingness to bring in more exemptions.

Investors are now waiting for full clarification as the time window for the new law to come into effect is short. Top on the list of worries is how second homes will be defined especially if the buyer is from overseas.

One thing is certain however, stamp duty is a tax on capital.  Second home owners and amateur landlords now need more funds to enter the market because a huge chunk of their deposits will be spent on it.


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