David Miles, a former Bank of England economist, has described the government’s mortgage interest tax relief reform as “terrible” – but fears it cannot be resisted.
The four-year phased reduction of mortgage interest tax relief for landlords begins on April 1, just seven weeks from now, but Miles – a former member of the Bank of England’s Monetary Policy Committee – has told a meeting in London that landlords will be badly hit financially.
“If you are a landlord who is affected by both of these changes and you are a higher rate tax payer, then you might need your rental income to rise by somewhere between 25 and 30 per cent to maintain your return. I don’t expect rents to go up by anything like as much as that, partly because tenants can’t afford it, but I suspect there will be a fairly chunky rise in rents” he told the meeting, as reported in the Daily Mail.
Miles says tenants will also be hit, including those saving to buy, and who will save less as a result of having to pay steeper rental bills.
“That makes life for those people who hope to be owner occupiers but are still in the rental sector unambiguously worse off … I think it’s a terrible tax change for what it’s worth, but we seem to be pushing on” he says.