LATEST: One in three landlords who remortgage will fail affordability tests

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One in three landlords could be forced to sell up after failing their lender’s affordability test to re-mortgage, it has been claimed.

The stark warning comes from buy-to-let specialist Mortgages for Business which says some buy-to-let investors are being forced to accept variable rates as high as 9.5%. Others are disposing of properties because they can no longer afford their loans.

Some lenders are offering landlord borrowers product transfers, a new deal without asking them to pass a new stress test, while others will allow borrowers to re-mortgage back to them at reduced fees, but not all, says MD Gavin Richardson (pictured), who explains it’s a critical time for the sector. 

“We’re seeing landlords coming off rates of 3.5% and being unable to re-mortgage because, according to the lender’s stress test, their loan is no longer affordable,” he adds. 

“Unable to secure a new deal and with nowhere else to go, their loans are reverting to the lender’s standard variable rate which average about 7.5%.

“In the worst-case scenario, they are moving to their lender’s standard variable rate at rates as high as 9.5%. 

“Their only other options are to pay a socking-great fee to secure a more reasonable interest rate, which can cost them tens of thousands of pounds, or they can sell up and go home.”

£1,200 a month

Richardson gives the example of a landlord charging £1,200 a month rent with a mortgage of £225,000 coming off a fixed rate of 3.99% who would now be offered a re-mortgage of £180,893, based on a rate of 5.49%, falling £44,000 short of the loan amount they need. 

“At a rate of 5.99% the shortfall rises even higher to £59,207 while at 6.29% it is £67,114. To be accepted for a re-mortgage of £225,000, the landlord would have to increase the rent by nearly £300 to £1,495.”

Read more about landlord mortgages.

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