More landlords lose properties as interest rates and rising prices hit home

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At least 410 buy-to-let mortgaged properties were repossessed in the first quarter of 2023, 28% higher than in the previous quarter – the highest level since the start of the pandemic.

UK Finance reports that 970 buy-to-let mortgages fell into arrears during the same period as higher interest rates and cost-of-living bite.

There were 7,030 BTL mortgages in arrears of 2.5% or more of the outstanding balance, 16% higher than in the previous quarter. Of those, 3,420 were in the lightest arrears band (representing between 2.5 and 5% of the outstanding balance) which was 33% greater than in the previous quarter.

Faster rate

It appears that buy-to-let mortgages in arrears are increasing at a faster rate than residential mortgages, according to the banking industry body, which adds that percentage increases can look large when there is a low base. “Similarly, buy-to-let mortgages in early arrears increased 33% from the previous quarter, an increase of 850 mortgages. While these numbers are small, lenders know that people are worried about their finances. This is why buy-to-let landlords are offered the same tailored forbearance and proactive support from their lender.”

Exit market

Lee Grandin at Landlord Mortgages fears landlords may decide to exit the market only to wish, in hindsight, they hadn’t. “I am sure landlords are already concerned and will be looking at ways to improve their position such as selling, increasing rents or re-mortgaging,” he tells LandlordZONE.

Grandin adds that lenders seem willing to offer an increasing number of five-year fixed rate buy-to-let mortgages where the interest rate is kept low by adding a large fee to the loan. “In five years when these loans mature the landlord will have a bigger loan balance than today. Maybe lenders are confident that in five years’ time the landlord will be better positioned and that rising interest rates is a storm that will simply blow over.”

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