A third of UK landlords could be in trouble if interest rates rise

Landlord Expert
By Landlord Expert September 2, 2011 11:32

Despite little sign of interest rate rises, they remain a concern for almost one in three landlords.

Most pundits do not now believe that interest rates will go up this year, and there is even speculation of a further drop next. Lenders, who rely on swap rates rather than what the MPC decides, have recently been on a spree of rates chopping.

But 31% of private landlords in a new poll agree or strongly agree that they are worried about their ability to meet their mortgage payments should rates rise.

According to a panel of 662 landlords questioned by market research firm BDRC Continental, almost half of landlords (47%) have at least five buy-to-let mortgages on their portfolios and 73% have at least one.

The average total mortgage comes to £477,060.

The research reveals that BTL mortgage interest rate rises would present a financial challenge to many private landlords.

Faced with two possible interest rate rise scenarios, few landlords feel they would be insulated from the impact.

While a 1% increase would have a significant negative impact for 29% of private landlords with BTL mortgages, a 2% rise would create a significant impact for 53%, with 8% being forced to re-evaluate their future as a landlord, and 6% having to reduce the size of their portfolio or leave the private rental sector completely.

The research shows that one in seven private landlords have taken out a BTL loan in the last year – one-third to fund the purchase of another BTL property, one-third to get a lower interest rate and the remaining third for other reasons, such as to move from a residential to a BTL loan, obtain a fixed rate, or to fund development.

Just under a half (49%) of the landlords strongly agree that the market would benefit from more BTL lenders / greater competition, although 59% agree or strongly agree that they are satisfied with their current lender.

For 44% their choice of BTL lender was determined by the lowest interest rate, while 40% based their choice on advice from an intermediary.

Mark Long, director at BDRC Continental, said: “Year on year, private landlords are increasingly optimistic about the private rental sector. However, fears over potential interest rate rises are very real.”

Landlord Expert
By Landlord Expert September 2, 2011 11:32

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