Is buy to let landlords loss first time buyers gain?

Ever since the former Chancellor surprised us all in 2015 by announcing a plan to cut 100% tax relief on mortgage interest payments for buy-to-let landlords, the idea of building up a property portfolio has no longer seemed such an attractive proposition

Two years on, the fall-out from that decision seems to be reflected in recent figures from the Council of Mortgage Lenders. This shows that the numbers of first-time buyers getting onto the property ladder rose in February, while the sales of buy-to-let mortgages fell.

The Chancellor’s plan was to phase in a gradual decline in the amount of tax relief afforded to landlords paying off buy-to-let mortgages. Starting in April this year and arriving at a final 20% tax relief figure in 2020.

And so, last month, relief was cut to 75%. This is just ahead of the CML releasing generally positive figures. Which shows that the numbers of loans taken out in February by home-buyers were 48,600 –up 7% on January and up 2% on February last year.

Delve deeper into the figures, though, and you discover that although lending to first-time buyers increased by 6% compared to January and was up 12% on February last year, the number of new buy-to-let loans dropped dramatically, down 26% compared to the same period in 2016.

Has the Chancellor’s announcement levelled the playing field for first-time buyers? Are they snapping up properties that would previously have been bought by landlords and also benefitting from landlords forced to trim their property portfolios in order to boost profitability and cut their tax bill?

This certainly seems to be the situation. If it is so, it means that with more tax relief cuts to come means more bad news for landlords. However, the prospects for first-time buyers, who are vital for the health of the UK’s property market, are looking up.