55% of new buy-to-let mortgage applicants are unaware of the mortgage tax relief changes, with so-called ‘accidental landlords’ the least likely to be aware of these new regulations, according to latest research from landlord insurance provider, Direct Line for Business.

The survey conducted amongst mortgage brokers across the UK, found that 62% of applicants were unaware of either the changes to mortgage tax relief or the EU’s Mortgage Credit Directive (MCD), that means changes which could impact their ability to secure a mortgage. This lack of awareness rises to 71% amongst ‘accidental landlords’, namely those who rent out property due to unforeseen circumstances such as being unable to sell, or inheriting a home.

Mortgage advisers estimate that accidental landlords account for 17% of new mortgage applications, with overall buy-to-let mortgage applications growing by 29% in the past year according to the panel.

The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy-to-let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as ‘consumer’ lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests.

Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic-rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy-to-let property will pay a 3% surcharge on their stamp duty bill.

Nick Breton, head of Direct Line for Business, said: “The new EU legislation on mortgages coupled with the Government’s increase in buy-to-let taxation could significantly alter the buy-to-let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord.

“With house prices in the UK rising by 7% in the year leading to October 2015, and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city.”