According to David Whittaker of Mortgages for Business, figures for gross mortgage lending last year for the buy-to-let market are likely to be the top level we will see for some time.
Speaking as part of a panel debate at today’s Financial Services Expo (FSE) London, the premier exhibition for the financial services industry in London & the South East, Whittaker said: “In 2016 buy-to-let gross mortgage lending topped out at £40 billion and we are not going back there anytime soon. I think the final figure for 2017 will be £33 billion and potentially less than £30 billion in 2018.”
Other members of the panel agreed that much of that drop was down to a falling purchase market brought on by the various regulatory and tax changes that have been implemented in the last 18 months. However, other panel members praised the sector’s ongoing resilience.
Richard Tugwell, of Together said: “I think we underestimate the resilience in the buy-to-let market. There is certainly a split now between the vanilla and specialist market however we’ve just announced record lending figures and buy-to-let has played a part in that – we’ve seen a resilience in that market.”
Liz Syms, of Connect Mortgages agreed: “Professional landlords are resilient; they will manage the changes because it’s their business. They still want to be able to do this.”
The panel agreed that refinancing was driving the sector, given the fall back in purchase activity. Louisa Sedgwick of Vida Homeloans stressed they were a new lender in the marketplace but said: “We’ve seen a lot of refinancing and what purchase there has been is biased towards limited company.” Adrian Moloney of One Savings Bank agreed arguing that they had seen “an uptick in the limited company piece and refinancing onto five-year fixes with rates a big draw for landlords.”
When it comes to the mortgage interest tax relief changes which were introduced in April this year and will be phased in over the next four years, the panel suggested there was a knowledge split between ‘dinner party landlords’ and professional operators.
Moloney said: “When something starts to bite you in the wallet you start to take notice. As a landlord it’s therefore imperative that you get the right tax advice. Landlords have woken up and smelt the coffee on this.”
Whittaker agreed that such changes would be a big shock to amateur landlords. He argued: “Professional landlords are all over it, but there are 65% of landlords who are not. The big issue will come on the 23rd January 2019 when they press the button on their tax return and see how much extra they have to pay. And it will get worse the next year, and worse the year after.”
Syms said that advisers might find themselves in difficulty when it comes to the tax affairs of their clients suggesting it was important to make a distinction. She said: “Advisers should not get involved in providing tax ‘advice’ – you can however give tax ‘guidance’.”
The panel were also quick to mention the potential tax minefield that could exist for landlord clients who are potentially not declaring all of their income to HMRC. The ongoing Tax Amnesty is due to run out in 2018 and Whittaker said, at that point, HMRC would need to either extend it or “come down on landlords like a tonne of bricks”.
Sedgwick warned advisers that they could be deemed “complicit” in any case where a landlord was deemed to be reporting false income figures. Syms said that her advisers tell landlords they must declare their income, and they should inform the adviser what they are declaring before they move forward with any mortgage application.
FSE London is taking place today at Old Billingsgate in the heart of the City of London. All seminar sessions are CII-accredited and delegates can earn CPD hours.
FSE London is also hosting the inaugural National Mortgage Adviser Awards ceremony, in association with Mortgage Advice Bureau (MAB), which is recognising the top firms throughout the UK across 12 regions and through three specialist awards.
Further details on Financial Services Expo are now available at: www.financialservicesexpo.co.uk