In a climate of financial uncertainty, landlords are exhibiting increased caution due to prospective changes in Capital Gains Tax (CGT) and new Energy Performance Certificate (EPC) regulations.
- Recent analysis reveals landlords’ reevaluation of rental portfolios and liquidity ahead of potential CGT changes.
- A significant number of buy-to-let purchases and mortgages are not proceeding, showing landlords’ hesitancy.
- Increase in loan-to-value ratios indicates landlords are borrowing more against their properties.
- Buy-to-let mortgage applications are declining, reflecting a shift in landlord strategies.
In a period marked by financial uncertainty, landlords are showing increased caution, particularly in the face of potential changes to Capital Gains Tax (CGT) and new Energy Performance Certificate (EPC) regulations. These developments have prompted landlords to critically reassess their investment strategies and liquidity positions, as observed in a recent analysis by Acre.
According to Acre’s findings, there is a marked trend of landlords leveraging more against their properties, with loan-to-value ratios reaching nearly 72% in September, which is the highest for the year. This is indicative of a strategy where landlords either leverage increased debt or respond strategically to shifts in mortgage rates. While some landlords adopt higher debt positions, others reconsider their investment decisions, resulting in nearly 10% of buy-to-let purchases and mortgage applications failing to proceed.
The average loan-to-value ratio for buy-to-let purchases has climbed by 2.5% over the past year, highlighting a trend where borrowers are increasingly seeking larger loans relative to property values. In September alone, the buy-to-let mortgage and remortgage cases that did not proceed rose to 10.5% from 6% in August. Meanwhile, the percentage of buy-to-let applications abandoned by clients saw a substantial increase from 1.2% to 8% over three months.
Acre’s data further shows a decline in the percentage of new mortgage applications constituting buy-to-let purchases, which fell from nearly 6% a year ago to 4.9% in September. This indicates a trend among landlords who are either exiting the market or are pausing on new property acquisitions given the prevailing tax and regulatory pressures. Nevertheless, the sphere of buy-to-let remortgages remains relatively stable, accounting for 8.19% of all mortgage cases, suggesting that existing landlords are deploying remortgaging as a tool to optimise their financial circumstances.
Reuben Thompson, the vice president of innovation at Acre, observed that landlords are adopting a more conservative financial approach to mitigate over-leveraging and to enhance liquidity in anticipation of the Chancellor’s impending fiscal statement. He noted, “We are seeing in real-time how landlords are responding to concerns about the decisions being made around Capital Gains Tax and Energy Performance Certification regulations.” Similarly, Justus Brown, CEO of Acre, mentioned, “Even if the Treasury decides not to change the rate for second homes, the damage is already being done. Our data shows the volatility in the decisions being made by second home owners with buy-to-let mortgages.”
The shifting landscape in taxation and regulations is leading to a prudent re-evaluation of strategies by landlords.
