LONDON, July 8 (Reuters) - Britain is cutting tax relief onmortgages for wealthy landlords to eliminate some of theadvantages they have over people buying their own homes, financeminister George Osborne said on Wednesday.
Landlords who pay higher-rate tax are able to claw back 45pence in every pound of mortgage interest they pay, Osbornesaid, which had contributed to a rapid growth in buy-to-letproperties.
"Buy-to-let landlords have a huge advantage in the market asthey can offset their mortgage interest payments against theirincome, whereas homebuyers cannot," he said, adding thatbuy-to-let mortgages now accounted for more than 15 percent ofnew mortgages.
Osborne said interest tax relief would be restricted to thebasic rate of tax, which is currently 20 percent, with thechange introduced over four years from 2017.
The move hit shares in house builders, with more than 1.5billion pounds wiped from the value of the eight biggest.
"The crash in values today virtually wipes out all the gainsmade since the Conservative-won election in May," said Neil Shahat Edison Investment Research.
Barratt Developments, Persimmon, TaylorWimpey, Crest Nicholson and Bellway fellmore than 5 percent.
Property website Zoopla Property and estate agentFoxtons were trading more than 4 percent lower onWednesday afternoon.
Deloitte real estate tax partner Phil Nicklin said thebudget changes would hit buy-to-let landlords hard.
"A landlord who borrows at even a modest level might end uppaying more in tax than he makes in profit," he said. "Thismeasure must make buy-to-let investment a less attractiveproposition in future and may reduce the options for those whosee it as an alternative to a pension."
Analysts at UBS said that, disappointingly, it was the firstbudget for some time with negative impacts on the housing marketafter a series of very positive policies over recent years suchas the "help to buy" scheme, which helps homebuyers securemortgages. (Reporting by Paul Sandle; editing by Stephen Addison)