Landlords struggle with rising mortgage arrears

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by Gill Montia

Independent financial adviser, Hargreaves Lansdown, has calculated that around 10,000 buy-to-let landlords are more than three months behind with their mortgage repayments.

Set against the larger picture of the UK property market, buy-to-let borrowers in arrears form only a small proportion of the 155,600 total for June.

However, the firm’s research also suggests that more landlords will be facing financial difficulties in the next two years, as large numbers of buy-to-let investors are due to remortgage in 2009 and 2010, with the inevitable increase in costs.

Rates on buy-to-let loans have been rising steadily since the onset of the credit crisis, while the market for such lending has shrunk by a dramatic 93%.

Some landlords may even find it impossible to remortgage: those who purchased property when the housing market peaked last summer will have seen prices slip by around 10% and could therefore already be in negative equity.

Hargreaves Lansdown estimates that 18% of outstanding buy-to-let loans were taken out in 2007.

In addition, the theory that rental property will be in short supply until potential first-time buyers have the means and confidence to enter the housing market is being undermined by a rise in available rental properties.

Homemovers unwilling or unable to sell during the market downturn are opting to let, adding to the choice available to renters and tugging on rental yields.