BTL jitters ahead of probable CGT rise, suggests new market data from Acre

17 October 2024

Landlords may be having jitters about investing in new properties ahead of potential Capital Gains Tax rate hikes and new EPC regulations, according to new analysis from Acre, the UK’s fastest growing intermediary platform.

Acre has overseen over £24 billion in mortgage volume so far this year. Analysis of these transactions shows that landlords are examining their rental portfolios and considering their liquidity in anticipation of potential new CGT reforms. The data reveals that owners leveraged more against their properties in September than at any other time this year, peaking at almost 72% LTV. While some may be taking on more debt, Acre also found that other owners are rethinking their investments, with the volume of BTL purchases and mortgages not proceeding due to the landlord’s decision nearing 10%.

Further analysis of the buy to let (BTL) mortgage market found that :
• The average LTV for BTL purchase cases has risen 2.5% in a year, hitting a peak of 71.75% in Sep 2024. This suggested that 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.
• The volume of BTL purchase and remortgage cases not proceeding has steadily increased in 2024, seeing a huge leap from of 6% in August to 10.5% in September (with further growth being seen in October)
• The percentage of BTL applications abandoned due to the client choosing not to proceed for business reasons has shot from 1.2% to 8% in the last three months, showing that landlords are rethinking how their property portfolios
• 4.9% of all new mortgage applications were Buy-To-Let purchases in September 2024, down from nearly 6% a year prior. This decline indicates that landlords are exiting the market rather than acquiring new BTL properties in anticipation of new tax and regulatory burdens
• BTL remortgage cases remain level over the year, accounting for 8.19% of all mortgage cases. 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 of BTL & BTL Remortgage cases was 61.5% in September 2024

Reuben Thompson, Acre’s Vice President, Innovation said: “We are seeing in real-time how landlords are responding to concerns about the decisions being made around Capital Gains Tax and Energy Performance Certification regulations. They are being more conservative with their financing so as not to over leverage their positions and to increase liquidity. It's likely that we'll see this pattern continue after the Chancellor’s statement is made at the end of the month unless what's actually in her budget is substantially different to what the market is already pricing in.

These findings are based on analysis of mortgage cases managed through Acre’s intermediary platform and are based on cases keyed between September 2023 and October 2024.

Justus Brown, Acre’s CEO and Founder of Acre added: “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 home owners with BTL Mortgages.”