Buy-to-let lending has HALVED since Osborne’s reforms

GEORGE Osborne’s controversial tax raid on landlords has triggered a 50 per cent slump in buy-tolet lending, figures show.

The former chancellor introduced a 3 per cent stamp duty surcharge on buy-to-let properties and second homes on april 1 last year.

The move was billed as an attempt to cool the booming buy-to-let market.

But it was also seen as an assault on aspiring middle-class savers who had hoped to invest in a second property to fund their retirement.

as well as the stamp relief surcharge, tax relief on mortgage payments is being gradually reduced for landlords from 45 to 20 per cent over the next three years.

Yesterday, figures published by the Council of Mortgage Lenders revealed that 71,100 loans were issued to landlords for house purchases in the year since the stamp duty change.

This compares with 142,100 loans in the previous 12 months.

In March, 6,500 buy-to-let loans were issued. Before Mr Osborne announced plans for the stamp duty surcharge in his november Tax raids: George Osborne autumn statement in 2015, banks regularly issued more than 10,000 loans a month.

The CML said: ‘The number of loans for buy-to-let house purchases remained low compared to activity seen before the change on stamp duty on second properties introduced in april last year.’

The figures also reveal that buy-to-let borrowing plunged by nearly 80 per cent year-on-year in March.

Landlords borrowed a total of £900 million for house purchases in March, marking a 79.5 per cent decrease compared with March 2016, when £4.4 billion-worth of loans were issued.

The CML pointed out that the fall was exaggerated because of a dramatic surge in buy-to-let lending in March last year just before the tax hike was introduced.

Mr Osborne’s surcharge lifts each stamp duty band by 3 per cent for buy-to-let purchasers.

It means that for properties worth between £125,000 and £250,000, where the stamp duty is 2 per cent, buy-to-let landlords pay 5 per cent.

For the average buy-to-let purchase of £184,000, that means they will pay an extra £5,520 from april last year.

Last night experts warned that the buy-to-let market is likely to shrink further, with landlords facing a ‘triple whammy’ of tax hikes and tougher affordability checks, which were enforced by Mr Osborne’s successor Philip Hammond.

aspiring landlords now have to prove they can make a 25 per cent profit from tenants even if large interest rate rises make their mortgage more expensive.

But the collapse in buy-to-let lending is likely to be seen as a victory for Mr Osborne, who is now editor of the London Evening Standard after being sacked by Theresa May.

as well as putting the brakes on the thriving buy-to-let market, it has also swelled the Treasury’s coffers.

Rising property prices meant the surcharge raked in an extra £1.4 billion last financial year – twice as much as Mr Osborne had expected.

David Hollingworth, from mortgage broker London & Country, said: ‘Many landlords will be feeling punch-drunk now. They face a triple whammy of tax hikes and tougher affordability checks which are likely to cause the buy-to-let market to shrink even further.’

He added: ‘not all landlords are professional investors with big portfolios. Many aspiring landlords are ordinary households who wanted to invest in property to secure better returns than they can get from savings accounts.’

But supporters of the raid have argued that it has freed up homes for those trying to get on the property ladder.

CML figures show first-time buyers borrowed £4.9 billion to buy new homes in March, up 29 per cent on February and up 9 per cent on March last year.

‘Landlords will be punch-drunk’