Wednesday, Jul 08, 2015

This is big - but will it make it into law...?

AccountingWeb: Osborne’s reforms send property into spin

Higher rate tax payers only get 20% tax relief on interest, then someone who only breaks even (so makes zero profit) ends up effectively paying 20% tax on the mortgage interest they've paid - seems crazy, but it's true. Whether it gets changed before the idea becomes law, who can say...
But if it sticks - whoopee!!

Posted by bidin'matime @ 08:35 PM (4685 views)
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6 Comments

1. Timbuk3 said...

Love the last line of the article 'you may just end up selling'

Wednesday, July 8, 2015 10:02PM Report Comment
 

2. enuii said...

This is effectively attempting to engineer a soft landing by encouraging the most highly leveraged/mortgaged landlords to sell up before any interest rate rises make them insolvent.

Thursday, July 9, 2015 09:07AM Report Comment
 

3. libertas said...

Actually, BTL investors cause prices to fall. Renters bring down the value of an area plus, Agents manipulate prices low to suck in BTL buyers who will rent through their Agency, defrauding the vendor to accept lower prices through various means. We had it done to us! Got gazundered twice by a BTL investor!!!!!

So, do not think that slamming BTL will cause prices to fall. No, prices will likely rise if owner occupiers can bid for them.

As said, the only sustainable solution is to ban all letting agents from letting any home that they had an interest in selling within the past two years. This would bring true competition between BTL and buy to own folk.

Thursday, July 9, 2015 10:24AM Report Comment
 

4. Weirofhermiston said...

libertas said..."Actually, BTL investors cause prices to fall",

That'll be why prices have come down so much since the early nineties when BTL was little known to the present situation where nearly one in five homes is BTL. Hurrah for landlords!

Thursday, July 9, 2015 11:11AM Report Comment
 

5. reticent said...

@bidin'matime

The way you talk about it makes it sound like the current arrangement makes sense or is in anyway fair. They're not "effectively paying 20% tax on the mortgage interest they've paid," they're just not receiving all of the tax break they are currently getting.

Clearly, the chancellor doesn't see it as a typical business or one worth subsidising in the way it has been.


@1 Probably.


@2 Your acumen for this stuff is impressive. I will see your 2 anecdotal gazunderings and raise you 2.5m net BTL acquisitions over 10 years, i.e. an enormous increase in demand with no offsetting rise in supply.

It's amazing how many people think this didn't put up prices. I guess it's not that surprising that you're amongst them.

Thursday, July 9, 2015 12:28PM Report Comment
 

6. cheesypeas said...

@enuii I agree that this will likely increase supply. Indeed the reduction in housing benefit will have just as significant on BTL. However, with MMR taking out some of the demand, I would say these are measures designed to avoid increasing increase rates. There are too many risks in the global economy for rates to rise in the next 6 months or so... though I hope I'm wrong about this! With changes in BTL, and nom-dom status, I'm taking a calculated guess that London will have low growth in house prices over the next couple of years.

@libertas I'm sorry to hear of your gazundering experience, it must have been infuriating. However, your example is unlikely to be repeated since BTL owners will sell, not buy, so agents won't be able to play those games. The driver of prices in London right now is fragile supply. Hence this budget will likely dampen prices, regardless of which parties purchase.

Thursday, July 9, 2015 03:00PM Report Comment
 

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