According to research carried out by the Council of Mortgage Lenders, mortgage arrears amongst buy to let landlords are on the rise. The number of people in arrears rose by 6% in the third quarter of last year, which is the first time this has happened since the CML started monitoring the situation two years ago.
Stamp Duty Tax
The government has introduced several key changes in the last year, one of the largest being an introduction of a 3% stamp duty levy on anyone owning a second property. This came into effect in April 2016, which caused a large spike in sales completions in the buy to let sector. Many landlords considering investing in buy to let property rushed into buying in order to beat the 3% charge. Experts believe that at least some of these people made an investment they really couldn’t afford, which is what has caused the rise in mortgage arrears.
Mortgage Interest Tax Relief
The concern is that more landlords will fall into mortgage arrears when new tax rules come into effect next April. From April 2017, mortgage interest tax relief is being phased out, so landlords will pay more tax on their income from rental property. It has been estimated that around 440k landlords will be pushed into the 40% income tax bracket, many of whom will have no choice but to pass their extra costs on to their tenants.
Are you one of these landlords? If so, let us know in the comments section.