According to the Council of Mortgage Lenders (CML) almost 40 per cent more buy-to-let mortgages were approved in August than over the same period in 2014.
The CML’s new study showed that 22,200 buy-to-let mortgages were granted in August 2015 – 37.9 per cent more than in August 2014 – with a value of £3.4 billion.
It is estimated that around £1.4 billion of the buy-to-let loans granted in August were for landlords buying new properties, while almost £2 billion were for remortgage.
The increase in buy-to-let mortgages was far greater than the eight per cent rise in mortgages granted to home movers. However, the buy-to-let market still only represents 17 per cent of all mortgage lending.
It has been suggested that this jump in the number of buy-to-let mortgages is down to two main factors. Firstly, the pension freedoms introduced in April have given people aged 55 and over more flexibility in what they do with their pension pot and may have encouraged some people to make a buy-to-let investment.
Secondly, buy-to-let mortgage interest rates are now at the lowest that have been seen in a number of years, partly due to the low base rate set by the Bank of England.
However, things could soon change following the Chancellor’s decision to change the tax system for landlords in regards to mortgage interest payments and ‘wear and tear’.
From April 2016, the ‘wear and tear’ allowance that currently reduces the tax landlords pay will be replaced by a new system where they will only be able to pay less if they actually replace furnishings and can provide evidence of this to HM Revenue & Customs (HMRC).
Wealthier landlords, who currently receive up to 40 per cent and 45 per cent tax relief on mortgage interest, will also see changes that will mean they only receive up to 20 per cent tax relief by April 2020.