The 3% increase on Buy-to-let SDLT appears not to be just an easy tax option for the government. Reports from the Bank of England (BoE) reveal the high concern the BoE has given that Buy-to-let lending has increased by 40% since the 2008 financial crash compared to a 2% increase in owner occupier lending.
The BoE is concerned that the large levels of lending to Landlords could be a threat to banks and general financial stability, as buy-to-let landlords appear to be more vulnerable to an unexpected rise in interest rates or falls to income from void periods or decreasing rentals.
Officials on the BoE Financial Policy Committee stated in the last quarters meeting “new loans to buy-to-let investors were often subject to less stringent affordability tests than loans to owner-occupiers.”
The Financial Policy Committee is now asking for restrictions on buy-to-let lending in the same way as owner occupier mortgage lending. The Treasury are considering such actions and are consulting with the BoE, but wants to see if the 3% SDLT rises cools the market down at all.
Should such restrictions come into effect they would primarily effect large portfolio holders who rely on property portfolio price increases to remortage to raise deposits for new investments. Most large portfolio holders have very high LTV rates of borrowing against their properties.
Further interesting times ahead….