Press Comment: Gemma Harle's three takeaways
from Bank of England's Q3 mortgage statistics
11 December 2018
If you are covering the Bank of England’s Q3 mortgage statistics released today, please see the following comment from Gemma Harle, managing director of Intrinsic mortgage network, part of Quilter:
Figures released by the BoE today show that mortgage balances with arrears grew for the first time since Q2 2016. This is worrying considering last week the FCA published a Thematic Review which found that some customers who had long-term mortgage arrears were not receiving consistent and appropriate service from their lenders at what must be an inevitably stressful and financially complicated time. Often customers who have long-term mortgage arrears are vulnerable and the industry needs to identify and engage customers that are at risk of falling behind on their payments.
We recently saw the Government break out the fan fair and pat themselves on the back for the supposedly great work that the Help to Buy scheme heralded. While helping 400,000 first time buyers get on the housing ladder is certainly nothing to turn your nose up at, the picture is less rosy if you look at the broader picture for first time buyers. According to the Bank of England statistics, the share of new lending to first-time buyers remained steady at 21% in Q3, having steadily dropped since the start of the year. If we are to truly start to address the problem of ‘generation rent’ we need to speed up the pace of change with multiple policies, which could include incentivising downsizing. This will ultimately free up stock further down the chain and give first-time buyers a better chance of getting their first foot on the housing ladder.
These statistics further show that the amateur landlord is desperately struggling to be profitable in an increasingly hostile new tax environment. Landlords have started to feel the pinch given the crackdown on buy to let and so it’s unsurprising that fewer people are taking on that burden. As the higher tax bill phases in, by 2020 landlords may find that they are actually losing money if they maintain their current rents.
In simplistic terms, previously landlords could offset all their mortgage interest against rental income before calculating the tax due. So if their rental income was £750 a month and the interest on their mortgage was £750 they wouldn’t pay any tax on that. Now they can offset 50%, next year they will be able to offset 25% and in 2020 they won’t be able to offset any. So if they’re a higher rate tax payer with a £750 a month mortgage their tax bill grows from £0 to £300.