Landlords feel the squeeze as interest rate rises hit finances

11/08/2023

THE NUMBER of landlords behind on their mortgage payments has risen by almost a third over summer as spiralling interest rates cripple their finances.

UK Finance, the trade association, said 8,980 buy-to-let mortgages had arrears that totalled more than 2.5% of the outstanding balance at the end of June, an increase of 28% on the end of March. 

Almost half the struggling landlords were in arrears of more than 5% – and worryingly, UK Finance said its analysis shows that the BTL landlords who are missing their mortgage payments do not have tenants in arrears.

Borrowers have now been subject to 14 consecutive interest rate rises and, together with increases in everyday costs, this is having an impact on finances. 

Industry experts have said that if the trend persisted fewer homes would be available to rent, pushing up already high charges for tenants.

Brokers said many landlords were falling behind on payments because they had large loans that had become more expensive to service.

The landlords, like homeowners, have been hit by a rapid rise in mortgage rates over the past few months. 

The average two-year, buy-to-let mortgage rose from 5.56% at the start of May to 6.89% t at the end of last month, increasing by £221 the monthly repayment on a £200,000 interest-only mortgage, popular with landlords.

The number of homeowners in arrears has also risen over the past few months but not by as much as was feared. There were 81,900 homeowners with mortgage arrears in excess of 2.5% at the end of June, about 7% more than in April, according to The Times.

Sonia Fernandes of UK Finance said: “Mortgage lenders understand that we are moving through a period of greater pressure on household finances. This is why anyone who is worried about making their mortgage payments should reach out their lender early. 

“All lenders have teams of experts ready to help with a range of forbearance options which will be tailored to each person’s circumstances. The government has also launched its Mortgage Charter, to recognise the additional pressure on mortgage holders from higher interest rates. 

“While possession continues to remain a last resort, lenders have committed not to repossess within 12 months of a borrower’s first missed payment.”

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