How buy-to-let tax hikes could ease strain on first-time buyers

Written by: David Ingram
One of the biggest changes surrounding the housing market to come out of this month’s emergency summer Budget was the news that tax relief for landlords on their mortgage interest payments is to be cut.

From April 2017 the government will begin to phase out the higher rate tax relief gradually over a period of four years. Those who have a buy-to-let property will no longer to able to claim 45% tax relief on their monthly payments, instead they will only be able to claim the basic rate of 20%.

How will the changes help?

Just like many subjects that were highlighted in the Budget, opinion on the announcement of the buy-to-let changes was certainly divided. However, it could be great news for first-time buyers as the reforms should open up the market. At the moment, those looking to enter the property market are struggling against the rising problem of demand outstripping supply. As there are more people looking for homes than there are houses being built, this in turn results in sky-high house prices that first-time buyers cannot afford.

Under the current system, those looking to buy to let have an unfair advantage over first-time buyers because of the high rate of tax relief. Typically those who use buy-to-let are people who have extra cash that they are looking to invest. The 45% relief on mortgage payments is a good incentive on top of the extra income they would earn through rent. On the other hand, first-time buyers often find themselves saving up for a deposit that can often take months or even years, only to struggle to find a house they can afford. However, the cut in tax relief will give first-time buyers more opportunity to snap up properties in their price range by making them a less attractive option for landlords.

Fledgling buyers will be able to benefit from an increased supply of houses in the lower end of the market giving them the perfect place to start climbing up the property ladder as well as the possibility of lower house prices as supply and demand start to align themselves.

Although the changes won’t be introduced for another year and a half, it was refreshing to see an announcement in the Budget that could help those looking to buy their own home achieve their dreams. As the changes are slowly rolled out through the Conservative Parliament we should see improvements happen over time that should not only benefit first-time buyers, but the property market as a whole.

David Ingram is the founder of

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Everything you wanted to know about ISAs…but were afraid to ask

The new tax year is less than a fortnight away and for ISA savers or investors, it’s hugely important. If yo...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week