Significant increase in buy-to-let loans ahead of tax changes


10 February 2016

By Marc Dorsett

The first buy-to-let mortgages appeared on the market in the mid-1990s. Since then the sector has boomed. A shortage of housing and rising demand has pushed up house prices and rents, making the buy-to-let market, with its high potential returns, an attractive one for investors. Investors have been able to find yields as high at 15%, with the bonus of house price inflation on top. Coupled with this, a range of tax reliefs have further encouraged people to enter the market as landlords.

However, tax changes announced by the government last year are set to dampen the buy-to-let market. Landlords will not be able to deduct mortgage interest from their rental income before it is assessed for tax but will instead get a flat rate 20% tax credit. Those paying higher-rate tax will therefore lose half of their relief. Landlords in England and Wales will pay a 3% surcharge on each stamp duty band from April 2016. These changes have sparked a sharp increase in buy-to-let loans, with experts predicting that prospective landlords will move as quickly as possible to complete purchases before the extra stamp duty on second home purchases comes in.

According to the Council of Mortgage Lenders, there were 23,000 buy-to-let loans in November 2015, an increase of 35% on the year before. The value of buy-to-let loans increased by 46% in November 2015 compared with the same month a year earlier, to £3.5bn. Of this, £1.3bn was for house purchases, a 30% increase, and £2.1bn was for re-mortgages, up 61.5% as the prospect of an interest rate hike by the Bank of England draws nearer. 

There was a corresponding rise in the UK mortgage market as a whole, with a 9.3% increase in the number of home loans advanced for house purchases between November 2014 and November 2015. There is expected to be a steady rise in mortgage lending over the next two years.

The above is not legal advice; it is intended to provide information of general interest about current legal issues.

Here at Gepp & Sons we have the expertise to help you with all aspects of the buying and selling process, from residential conveyancing to tax advice. If you are considering buying or selling and would like a full breakdown of all known legal cost please contact our New Business Team on either 01245 343980 or email 

Likewise if you have an existing property portfolio and would like to discuss possible tax liabilities please contact Marc Dorsett on either 01245 228146 or