Mortgage interest change particularly hits large-portfolio BTL investors

New analysis shows how the phasing out of mortgage interest tax relief for buy to let investors may prove a particular deterrent to large-portfolio investors, ultimately leading to a reduction in stock for the private rental sector. 

Between 2017 and 2020 the amount of tax relief which landlords can claim will be limited to 20 per cent, rather than 40 per cent or 45 per cent which was previously claimed by those with higher gross incomes.

Research by Dr Ben Pattison of Sheffield Hallam University - commissioned by the Residential Landlords’ Association - previously looked at landlords letting strategies towards young renters - the under-35s. Now the same data, with the focus on letting to younger renters, has been reassessed to see how mortgage interest changes affect the landscape. 

“Our survey findings suggest that around one in five landlords (19 per cent) think that the MIR changes will make them less likely to let to under-35s” says Pattison.

However, landlords with one property or just a small portfolio are not so likely to rein in their letting, than those landlords with much larger portfolios. 

Almost one-third (31 per cent) of landlords with larger portfolios stated that MIR changes would make them less likely to let to under-35s; however, only 10 per cent of landlords with just one property are likely to be deterred to the same extent because of the harsher mortgage interest regime.

Reversing the mortgage interest changes - advocated by many in the lettings industry - would drastically change the landscape, the research suggests.

Some 58 per cent of those landlords questioned in the survey would then be more likely to rent to under-35s. Respondents with larger portfolios were more likely to state that reversing MIR changes would lead to them being more willing to let to this group of tenants. 

You can see the full article in the PEARL research section of the RLA website.