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Tracking the way

3rd December 2008 | back to article listings BACK    print this article PRINT

Those investing in buy-to-let were given a boost earlier this week when housing minister Iain Wright gave a speech at the National Landlords Association (NLA) annual conference in support of the industry, calling it a "great tool to help house the people of this country" and pledging not to stymie the growth of the industry with too much regulation.

Anyone looking for reasons for this expression of positive sentiment from the government - ending the previous "trench warfare" between the industry and decision makers, as NLA chairman David Salusbury put it - may see a range of good reasons. One may be the need for plenty of rented accommodation at a time when so many cannot access mortgage finance. But there are other reasons too.

Neil Young, the chief executive of property portfolio management firm Young Group, said the buy-to-let industry has been a major contributor of taxes to the government. He stated: "Buy-to-let is a sector that's sometimes unjustly maligned but not only does it fulfil a valuable role in providing quality housing stock, it also makes a significant contribution to the Treasury's tax revenues."

Mr Young identified this figure as now being £400 million a year. Part of the reason the sum is this size is that the fact that this figure is based on the personal incomes of investors, which are mainly taxed at 40p in the pound. This overall income, Young Group has calculated, has risen by £1 billion due to the cuts made in the base rate by the Bank of England monetary policy committee (MPC) from 5.5 per cent to three per cent this year and its consequent effect on the cost of buy-to-let mortgages, particularly trackers.

Reflecting on this, Mr Young said: "With an eye on the economy and the potential for base rate cuts, Young Finance - the group's FSA regulated mortgage company - was advising investors to take tracker mortgages as long ago as last December."

Young group concluded by noting that the Bank of England is widely expected to slash rates again this week by at least 0.5 per cent. This view has been widely held, not least among the 11 experts quizzed on the matter by Adfero.

Some of those polled argued for more than this, including Global Insight's chief UK economist Howard Archer. Advocating a one per cent reduction, he said: "Based on the dismal state of the economy, the minutes of the MPC meeting in which they discussed a big cut, the testimony by Mervin King, and other members of Parliament this week. I think they should."

Needless to say, investors with tracker mortgages could be in for a huge boost if that were to happen.

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