Quitting landlords could fuel further drop in house prices

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Buy-to-let landlords will influence house prices if a large number choose to sell up, according to rating agency Moody’s.

The firm is predicting that prices will fall by 10% in the next two years due to persistently high inflation and the recent spike in lending rates.

Rental income

Landlords can pass on the costs of complying with regulatory requirements to ensure rental income supports mortgage payments, but for an average mortgage, this would mean raising rents by almost 20%, according to Bank of England estimates, says Moody’s. Rents are currently increasing by about 5% while it points to anecdotal evidence that landlords are choosing to sell properties instead, putting additional downward pressure on house prices.

The turbulent mortgage market has seen HSBC announce a removal of all its new business residential and buy-to-let products, with the deals set to be available again on Monday, with potentially higher mortgage rates. Amid fears of a further interest rate rise, it follows a similar announcement made by Nationwide, which raised fixed rates for new borrowing to maintain sustainability. Nearly 10% of mortgages have been taken off the market due to concerns about increasing interest rates, according to Moneyfacts.

Limited edition

Meanwhile, Paragon Bank has launched a range of limited edition buy-to-let mortgages. Nil fee five-year fixed rates are available for those purchasing or re-mortgaging single self-contained properties, with rates starting at 6.35%, or HMOs at 6.60%. Alternatively, landlords can choose a five-year fixed rate with a flat fee of £2,995, with rates starting at 6.05% for SSCs, or 6.30% for HMOs. The five-year fixed-rate deals are available at 65% loan-to-value on loans up to £500,000.

Commercial director Louisa Sedgwick says: “We’ve listened to brokers who have told us that nil and fixed fee options should appeal to landlords wanting higher loan amounts, up to £500,000, alongside the certainty of fixing rates for five years.”

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