Existing buy-to-let lenders may not be subject to new stricter rules

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Last month, the Bank of England issued a report where it said lenders should impose stricter lending rules for buy-to-let commercial mortgages. However, according to a Telegraph article from October 2016, some lenders have announced that they will not apply the rules to existing borrowers who wish to remortgage.

The Bank of England wants borrowers to receive 125% of its commercial mortgage payments in rental income. Some lenders have increased this to 145%, while others are sticking to the suggested 125%.

Two of Britain’s largest lenders, Barclays and Nationwide, have said that existing customers wanting to remortgage will be able to do so with the same rent level as they bought their property, says The Telegraph. They hope that this will help landlords remain profitable when the new tax changes for landlords come into effect in 2017.

From April 2017, mortgage interest tax relief will be reduced to 20%, meaning that higher rate taxpayers will lose out because of the changes.

From 2020, landlords will no longer be able to deduct their mortgage interest payments from their rental income. This means that tax will be paid on turnover and not profit, but the Axe the Tenant Tax pressure group is lobbying the government to change this. It argues that many landlords will increase their rents to cover the extra money that the tax changes are costing them, and sees this as being equal to an unfair tax on tenants.

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