UK tax re­lief re­stric­tions will tem­per house price growth

Financial Mirror (Cyprus) - - FRONT PAGE -

The re­stric­tion of mort­gage in­ter­est re­lief for UK buy-to-let (BTL) land­lords will, in the short term, curb lend­ing in the sec­tor, which cur­rently makes up 15%-16% of mort­gage lend­ing, Moody’s In­vestors Ser­vice said in a spe­cial re­port. At the same time, 2015 is on track to be­come the best year for BTL mort­gage deal is­suance since the credit crunch.

“The gov­ern­ment’s de­ci­sion to re­strict BTL mort­gage in­ter­est re­lief re­flects a will­ing­ness to put in­vestors and owne­roc­cu­pied bor­row­ers on a more level play­ing field, given that the lat­ter can­not claim tax re­lief on their mort­gages,” ob­served Emily Rombeau, a Moody’s an­a­lyst.

“First-time buy­ers’ af­ford­abil­ity has de­clined, as they strug­gle to get on to the prop­erty lad­der. Af­ford­abil­ity con­straints and de­mo­graphic changes have in­creased the share of pri­vately rented hous­ing - this sec­tor’s evo­lu­tion has strongly con­trib­uted GBP 3.2 bln. A num­ber of build­ing so­ci­eties have also tapped the se­cu­ri­ti­sa­tion mar­ket: Coven­try Build­ing So­ci­ety and Co-op­er­a­tive Bank PLC in 2012, with Mercia No.1 PLC7 and Cam­bric Fi­nance Num­ber One PLC; Leeds Build­ing So­ci­ety in early 2015, with Guild­ford No. 1 PLC. Pre­cise Mort­gages also en­tered the BTL se­cu­ri­ti­sa­tion sphere this year; the re­cently es­tab­lished spe­cial­ist len­der has al­ready com­pleted two BTL trans­ac­tions for a to­tal amount of GBP 426 mln since Jan­uary 2015.

Moody’s re­search says that, while UK house prices in­creased by 3.5% in the first half of 2015 (ac­cord­ing to Na­tion­wide), most re­gions, ex­cept for North­ern Ire­land and York­shire & Hum­ber­side, ex­pe­ri­enced a fur­ther slow-down in an­nual price growth in Q2 2015. The monthly year-on-year growth in UK house prices grad­u­ally de­clined to 3.3% from 11.8% in the 12 months to June 2015.

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