Vince Cable has openly supported Chancellor George Osborne’s decision to tighten up mortgage tax relief for buy to let landlords, stating that further restrictions to landlords’ tax incentives are very likely.
Speaking at the Association of Short Term Lenders Conference 2015, the former secretary of state for business, innovation and skills said that he was an advocate of the Financial Policy Committee’s (FPC) stance on the current buy to let market and their concern that excessive buy to let may hinder the stability of the UK housing market.
The amount of tax relief that buy to let landlords can claim back is to be cut be from 45% to 20% for top rate tax payers, starting from 2017 to 2020.
"I think my former colleague George Osborne has done the right thing which is to tighten up tax relief. There is absolutely no justification for giving preferential tax treatment to borrowing for buy-to-let as opposed to borrowing for other forms of investment.
"It's now as you know being reduced to the standard rate. I would be surprised if they don't tighten it up further."
"The returns on buy to let over the last five years relative to investing in equities are staggeringly high which is an obviously inducement to get into it.
"I do share some of the concerns from the FPC about the potential risks to the sector because if we do get a downturn in the housing market those guys are heavily exposed and if we get an upward movement in interest rates many of them are very highly geared so you can see the problems coming down the track."
Cable also cautioned against the global risks in China, raising interest rates too early, the reintroduction of right to buy by the Conservative party and the “abnormal” state of monetary policy.
"What we had in 2008 was the economic equivalent of a heart attack.
"What happened in 2008 had serious consequences and the legacy of those is still with us in monetary policy."
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