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what-changed-for-mortgage-lenders

Mortgage lenders and housebuilders were long predicting the Chancellor’s 20th March Budget would address strains on the housing market. In particular, the UK’s intense housing shortage and current lending scarcity.

No Capital Gains Change

Buy-to-let landlords were also pricking their ears to hear if anything would be in it for them. A reduction or elimination of capital gains tax could encourage sales and make more properties available to buyers – but no such luck.

Buy to Let Excluded from Help to Buy

And, while the expansion of the FirstBuy program (now Help to Buy) to include second-time purchasers allows more people to come into the housing market at (theoretically) higher prices than previously possible, buy-to-let landlords are excluded.

Will NewBuy Affect Availability?

In addition, the revised NewBuy scheme, which involves government underwriting £130bn worth of high-street mortgages for both new and old builds, may be a boost to lenders, but less so to the construction industry.

Government financial backing for lenders has, since the last Budget, increased sales and, as a result, housebuilders’ profits. But it has not dealt with the real shortage of buildings. This is the root of the problem for both potential homeowners and landlords looking to increase income in a stagnant economy.

Buy to Rent Increase

On the other hand, the Chancellor offers a 5x increase in build to rent, as well as a new £100,000 discount on Right to Buy (RTB). Both these moves would increase the number of available properties for private landlords.

While the impact on house prices is of course hard to predict, the new properties may tempt more first time landlords to buy property to rent. These new landlords would be advised to seek out the mass of available resources covering all aspects of the landlord experience. For example, a number of websites offer landlords insurance tips for those trying to choose policies, and The Telegraph and The Guardian have compiled lists of other useful resources for entrants to the buy-to-let market.

Rental Income in the Short Term

Landlords not seeking to grow property portfolios could take some satisfaction from the lack of movement on housebuilding. This implies that demand, especially in London, will continue to outstrip supply for several years.

The flipside is that a shortage of social housing, as people are encouraged by higher discounts to take up RTB, combined with the housing benefit cap is likely to result in more tenants unable to keep up with payments. If you are a landlord with social tenants, this will affect your income.

While anyone whose tenants are entering the 40% income tax bracket (starting at £41,451 come the 2013/14 tax year) may also need to rethink rents and mortgage payments.

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