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TODAY'S OTHER NEWS

Budget tax changes will cut demand and prices says credit agency

Credit rating service Moody’s is warning that restrictions on mortgage interest relief for buy-to-let landlords will slow house price growth in the short term at least. 

Chancellor George Osborne announced in last month’s Budget that tax relief on mortgage interest payments and arrangement fees incurred when taking out buy to let mortgages would be restricted to the basic rate of income tax, currently 20 per cent - even if the individual landlord was liable for the payment of higher levels of income tax. This new measure will be phased in over four years from April 2017.

Moody’s says that in the coming months this tax change will produce reduced demand for buy to let properties will reduce UK house price growth; as a result house prices will, when assessed over all of 2015, have risen by five per cent. 

But Moody’s analyst Emily Rombeau says: “Notwithstanding the softening in house price growth, the risk of an immediate house price decrease is limited, given the housing shortage and the economic recovery.”

The credit rating service says the buy to let market has grown well since 2010 and now accounts for 16.8 per cent of total gross mortgage lending and 25.3 per cent of total house purchases in the first quarter of this year.

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