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Buy-to-let and First-Time Buyers, Are their Fortunes Changing?

There’s growing evidence that buy-to-let landlords are not as active in the housing market as they once were, meaning that young buyers are likely to find it a little easier to get on the housing ladder.

The Council of Mortgage Lenders (CML) reports that lending in March was down 19% on the previous year, at £21.4bn, and attributes the downturn to landlords withdrawing from the lettings market.

 Buy-to-let tax bites

The advent of the new taxes on rental income that started to take effect from April 2017, as well as the introduction of tighter lending controls requiring landlords to demonstrate greater levels of rental cover for borrowing, have served as a disincentive. Estate agents report a significant drop in new property purchases by landlords and more are selling existing rental properties.

The past 20 years have seen an explosion in the market for privately rented homes, with the number of rental properties more than doubling to more than 5.3 million households today. The CML reports that buy-to-let activity has been around 42% lower year-on-year and the downward curve in activity began when the additional stamp duty on second homes was introduced in April 2016. Buy-to-let landlords are clearly considering their options.

Some have set up limited companies and transferred their properties into them to escape the higher tax on rental income.Others have increased rents to cover their loss of income tax privileges. Lenders are also providing help to first-time buyers; more are comfortable lending to those with 5% deposits. According to Moneyfacts, more than 50 lenders are operating in that market, offering over 250 different deals.

If you’re a first-time buyer looking for a mortgage, why not contact us for some good advice?