Lenders require deposit top-ups as property prices decline

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by Gill Montia

Analysts in the buy-to-let sector are predicting difficult times ahead for landlords, should house prices continue to fall.

Many amateur landlords may not even be aware that some of the UK’s buy-to-let lenders require borrowers to increase their deposits if the equity in their investment declines beyond a certain point.

In a decade of property inflation, scant regard will have been paid to such a clause in the small print of a mortgage agreement.

In the case of an £85,000 mortgage on a house valued at £100,000, a 10% drop in property prices means that borrowers will be required to find £8,500 to maintain a maximum loan-to-value ratio of 85%.

Many may be forced to sell, which could have unfortunate consequences for the wider housing market, particularly as the latest survey from the Royal Institution of Chartered Surveyors shows confidence in the market hitting a 30 year low, in March.

In addition, buy-to-let customers may already have been spooked by rumours (that have been denied) that some buy-to-let lenders are in financial difficulties.

Meanwhile, landlords who bought at the height of the city centre apartment boom are being advised to consider suing surveyors who could have overvalued the properties.