Landlords show increased caution amid anticipated CGT changes
Author: Marvin Onumonu of The Intermediary
Landlords showed uncertainty about investing in new properties due to anticipated hikes in Capital Gains Tax (CGT) and new Energy Performance Certificate (EPC) regulations, according to analysis from Acre.
The platform has managed over £24bn in mortgages this year, revealing that landlords are reviewing their rental portfolios and liquidity ahead of potential CGT changes.
Acre found that owners leveraged more against their properties in September than at any point this year, with loan-to-value (LTVs) ratios peaking at almost 72%.
While some landlords are increasing their debt, others are re-evaluating their investments, with nearly 10% of buy-to-let (BTL) purchases and mortgages not proceeding due to owners’ decisions.
The average LTV for BTL purchases increased by 2.5% over the past year, reaching 71.75% in September 2024.
This indicated that borrowers are taking on larger loans relative to property values, either leveraging more debt or responding to lower mortgage rates.
The volume of BTL purchase and remortgage cases that did not proceed jumped from 6% in August to 10.5% in September, with further increases noted in October.
The percentage of BTL applications abandoned by clients rose from 1.2% to 8% in the past three months, reflecting landlords’ reassessments of their property portfolios.
4.9% of all new mortgage applications in September were BTL purchases, down from nearly 6% a year ago, indicating landlords are leaving the market rather than acquiring new properties amid tax and regulatory pressures.
BTL remortgage cases remained stable over the year, accounting for 8.19% of all mortgage cases, suggesting existing landlords may be looking to optimise finances through remortgage options.
The average loan-to-value of BTL mortgage and remortgage cases stood at 61.5% in September 2024.
Reuben Thompson, vice president, innovation at Acre, said:
“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. They are being more conservative with their financing so as not to over leverage their positions and to increase liquidity. It’s likely that we’ll see this pattern continue after the Chancellor’s statement is made at the end of the month unless what’s actually in her budget is substantially different to what the market is already pricing in.”
Justus Brown, CEO and founder of Acre, said:
“Even if the Treasury decides to not 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 BTL Mortgages.”
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