Landlords are taking steps to protect themselves financially ahead of the Autumn Statement, research suggests.
It claimed that landlords are examining their rental portfolios and considering whether to sell ahead of the mooted rise in capital gains tax (CGT).
The Chancellor Rachel Reeves is expected to increase the tax, which hits landlords’ profits when they sell.
Gains are currently taxed at either 18% or 24%, depending on whether a landlord is a higher- or basic-rate taxpayer.
There is speculation that the rate could almost double, prompting landlords to consider their position in the market.
The research from Acre suggested that the volume of buy-to-let (BTL) purchases and remortgage cases not proceeding has soared from 6% in August this year to 10.5% in September.
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Damage is ‘already done’
The intermediary platform suggested that the speculation about the tax hikes – regardless of what they actually turn out to be – had already damaged the market.
Justus Brown, chief executive of Acre, explained: “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 homeowners with buy-to-let mortgages.”
Acre went on to say that the percentage of BTL applications abandoned due to landlords choosing not to proceed for business reasons has increased from 1.2% to 8% in the last three months.
Landlords exiting the market
In addition, it revealed that 4.9% of all new mortgage applications were BTL purchases in September 2024, down from nearly 6% a year ago.
It said that the decline indicates landlords are exiting the market rather than acquiring new BTL properties in anticipation of new tax and regulatory burdens.
Meanwhile, BTL remortgage cases remain level during the year, accounting for 8.19% of all mortgage cases.
In addition, remortgage activity remains a larger proportion of mortgage cases compared to overall BTL cases, suggesting that existing landlords may be looking to optimise their finances through remortgage routes.
The average loan to value (LTV) of BTL and landlord remortgage cases was 61.5% in September 2024.
The average LTV for BTL purchases rose 2.5% in a year, hitting a peak of 71.75% in September 2024.
This suggests borrowers are taking on larger loans relative to the property value to either leverage more debt, using smaller deposits, or are responding to lower mortgage rates by financing more of their purchases.
Acre claimed that these trends were likely to continue after the Chancellor’s statement at the end of the month – unless what’s actually in the Budget is substantially different to what the market is already pricing in.
The research is based on analysis of mortgage cases managed through Acre’s intermediary platform and is based on cases between September 2023 and October 2024.
