Buy-to-Let repossessions rise says UK Finance

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Mortgages:

Home repossessions
have risen generally in Q3 2019, but there’s been an even more
dramatic increase in repossessions in the buy-to-let market.

UK Finance has
reported that home repossession jumped by 19% when compared to the
same period last year, but the equivalent figure for buy-to-let is
40%, involving around 800 properties.

The mortgage
industry trade association points out, however, that the figures
involved are still well below levels seen following the credit crunch
years, between 2009 and 2014. Describing these figures as a “slight
increase” it goes on to explain that this is “partly the result
of a backlog of historic cases which are being processed in line with
the latest regulatory requirements.”

According to UK
Finance overall arrears have fallen slightly, but serious arrears
have risen by 9 per cent. It is estimated that around one-third of
landlords plan to sell at least one property over the next 12 months.

Following an FCA
regulatory review a couple of years ago, the rules were changed on
how lenders have to calculate what a borrower owes when a buy-to-let
mortgage falls into arrears. UK Finance says this has led to
wholesale reviews of a large number of cases on an individual basis.
However, repossession applications are only instigated when “all
other options have been exhausted.” This could account for the
backlog which it now says has distorted the overall picture.

It shows though how
some buy-to-let landlords are struggling balancing their finances,
especially those who are highly geared with mortgage finance. Next
year the phased-in reduction in mortgage interest relief will be
fully implemented adding even more tension into the equation.

David Smith, policy
director at the Residential Landlords Association (RLA), has said:

“Repossessions for
mortgage arrears take place for many different reasons.

“Mortgage interest
relief changes, which are now almost fully implemented, the
increasing cost of regulation and the ever increasing time to
repossess a property are all major factors.’

“Since most
repossessions of this kind lead to tenants being evicted it is vital
that the next government actively supports the majority of landlords
doing a good job to provide the homes to rent the country needs.

“If we want to
develop long-term tenancy models we need also to support landlords to
stay in the market long term.”

Mark Pilling
managing director at Spicerhaart Corporate Sales told
MortgageStrategy.co.uk:

“Arrears remain
low, but with weak retail performance and worsening economic data,
it’s difficult to imagine this being sustained long into the new
year. The mortgage possessions figures are concerning. UK Finance are
right to point out that this stems in part from historic cases but it
is nonetheless a significant jump.”

David Smith added
further:

“We warned the
government that the tax increases they have imposed on landlords
would be counter-productive and these figures show how right we were.

“All they are
achieving is driving landlords to leave the market, damaging
investment and making it more difficult for tenants to find somewhere
suitable to live.

“Whoever is in
government following the election needs to completely change the
approach and start to support good landlords to encourage them to
invest to meet the rising demand for rented housing.”

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