Nationwide: Tax relief cuts ‘will not dampen buy-to-let’

The Chancellor’s move to curb tax relief on buy-to-let mortgages is unlikely to dampen activity in the sector, Nationwide Building Society’s senior economist has forecast.

George Osborne’s decision to begin tapering down tax relief for buy-to-let borrowers to the basic rate starting in April 2017, will not deter landlords from investing in retail properties according to Nationwide’s Stefano Silvestrin.

Speaking at the Financial Services Expo in London yesterday, Silvestrin said the decision to cut the tax relief higher-rate taxpayers could claim down to a basic rate level over the next four years might however have a ‘dampening’ impact. “Activity [in the buy-to-let market] will not be as high as it would have been if this measure had not been introduced,” he says. “But we don’t think it will have a major impact.”

He says it is likely that the buy-to-let market will continue along its current path with “modest growth” as the “risk perception” around buy-to-let has dropped for lenders, which is why there is more activity and competition.

Further regulation of the sector is however looking likely, he warns. Silvestrin believes that the financial regulators could act further in the buy-to-let space if they believe that lending levels are getting too high and the sector is securing too great a proportion of total lending.

“If they [the regulators] do anything, it will be around increasing the rental cover ratio required and increasing stress test levels on buy-to-loans,” he says. “[Buy-to-let] is likely to become more regulated.”