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Landlords must act to counter new tax rules

Buy-to-let investors should make it a priority to ensure they have the most competitive mortgage deals following the government’s announcement that tax relief is to be cut back.

In his summer Budget last week, Chancellor George Osborne revealed that the relief landlords can claim on mortgage interest payments would be limited to a maximum of 20% rather than the current 40% or 45% from 2017.

Andy Knee, chief executive of property service firm LMS, said the rule change was likely to be a “serious blow” to landlords.

“The change is likely to reduce their appetite for gearing within their portfolios,” Knee said. “But of course, landlords can reduce the impact of the Chancellor’s tax-grab by ensuring they have the most competitive mortgage deal on each and every property in their portfolio and this could lead to a remortgage bonanza for brokers and lenders alike.”

Knee added that the move was likely to be welcomed by first-time buyers. “They may find securing their chosen property a little easier as a consequence,” he said. “Rising house prices in London and the areas around the commuter belt have created a generation of squeezed renters, unable to save enough for a deposit on a first home, who find that limited housing stock, a falling turnover of homes, and competition from tax subsidised landlords has barred them from the market.

“Reducing these subsidies won’t solve the housing crisis, but it does shift the playing field a little in favour of first-time buyers.”

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