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Accidental landlords to suffer in buy-to-let onslaught

Accidental landlords are most at risk of being caught out by Chancellor George Osborne's tax raids and new EU mortgage legislation, new research shows.

More than half of all buy-to-let mortgage applicants are unaware of the impending changes to mortgage law

Accidental landlords, those who did not intentionally set out to rent out a property, are least likely to know about these regulatory changes

Research by landlord insurance provider, Direct Line for Business, has revealed that 62% of applicants were unaware of either the changes to mortgage tax relief or the EU’s Mortgage Credit Directive (MCD), which could hit their ability to secure a mortgage. 

This rose to 71% amongst accidental landlords who rent out property due to unforeseen circumstances such as being unable to sell, or inheriting a home.

Mortgage advisers estimate that accidental landlords account for approximately 17% of new mortgage applications.

The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy-to-let mortgage applications, compared to 59% who see a negative impact. 

The EU’s MCD may view some landlord mortgage lending as “consumer” lending which could be subject to more stringent criteria. 

Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests. 

Changes to the mortgage tax relief will be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic rate tax on this amount.  

Nick Breton, head of Direct Line for Business said: “The new EU legislation on mortgages coupled with the Government’s increase in buy-to-let taxation could significantly alter the buy-to-let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord.”

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