The budget tax change will reduce UK house price growth | AVRillo

The budget tax change will reduce UK house price growth

Friday 07 August 2015  / Ruth Montia

The Chancellor George Osborne had announced in the Budget last month that tax relief on mortgage interest payments and arrangement fees that incurred when taking out buy to let mortgages would be restricted to the basic rate of income tax, presently 20%. This is 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 credit rating agency say that this tax change will produce reduced demand for buy to let properties, it will reduce UK house price growth and as a result house prices will increase by 5%.

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.”

Moody’s believe the buy to let market has grown well since 2010 and now accounts for 16.8% of total gross mortgage lending and 25.3% of total house purchases in the first quarter of this year.