New figures confirm that buy-to-let continues to outperform the mortgage market but industry experts warn that the forthcoming tax crackdown may soon put a stop to the boom.

Buy-to-let lending for house purchases grew stronger than homeowner loans for most of the year, according to figures from the Council of Mortgage Lenders (CML), published yesterday.

The number of loans soared by 39% to 25,200 in the year to July, which was also a rise of 14% on June.

And the value of those loans rose 52% to £3.8 billion, after increasing by value for the third consecutive month.

The CML said this was partly a response to the greater slowdown seen by buy-to-let after the financial crisis.

While buy-to-let house purchases rose significantly, buy-to-let remortgage activity has been particularly strong, up 69% year-on-year.

Steve Bolton, founder and chairman of Platinum Property Partners (PPP), said low interest rates have prompted many landlords to secure a cheaper deal, with the number of buy-to-let remortgages up 54% since July 2014.

“Mortgage interest payments can total up to 50% of landlord’s total annual costs, so savvy investors will be grabbing the opportunity to cut their monthly repayments with both hands.”

Bolton warned that the tax clampdown announced by Chancellor George Osborne in his summer Budget poses a significant threat to landlord profitability and threatens to derail future investment in buy-to-let.

“The scaling back of tax relief on mortgage interest payments will have a significant impact on the bottom line for many landlords who pay above the basic rate of income tax, and some could fall into a loss-making situation.

 “Some landlords may be forced to raise rents to regain the profit lost as a result of the changes.

“Others may resort to selling up and abandoning buy-to-let altogether, constricting supply at a time of severe property shortages. 

“Landlords must ensure they have a robust business model that maximises rental income if they are to survive the changes and still turn a healthy profit.”