Over half (55%) of buy to let mortgage applicants are unaware of the changes that are soon to impact mortgage law, new research has found.
The research by Direct Line for Business stated overall 62 per cent were unaware of either the changes to mortgage tax relief or the EU’s Mortgage Credit Directive (MCD). That figure rises to 71 per cent lack of awareness for accidental landlords, those who did not intentionally plan to rent a property out – circumstances such as being unable to sell or inheriting a home.
The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as ‘consumer’ lending and could, therefore, be subject to more strict lending criteria. The research showed that only 7 per cent of mortgage advisers believe that the MCD will have a positive impact on approvals of buy to let mortgage applications while 59% expect it to have a negative impact.
What are the changes?
Changes to the mortgage tax relief are set to be phased in from April 2017. Landlords will no longer be able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20 per cent basic rate tax on this amount. Landlords are also now paying a three per cent surcharge on stamp duty.
Quote from Louise Burford, operations director “The new legislation on mortgages alongside the Government’s increase in buy to let taxation could significantly alter the buy to let market. It is important to put these factors into consideration for mortgage applicants on how they could impact them as a landlord”
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