Buy-to-let arrears worsening at faster rate than owner-occupied mortgages
Buy-to-let arrears of more than 2.5 per cent of the loan amount have risen by 42.6 per cent in four years, new research has found.
Over the same period, cases of arrears for homeowners of more than 2.5 per cent have declined by 8.6 per cent, from 83,870 in the first quarter of 2019 to 76,630 in the equivalent quarter this year.
Property lender Octane Capital analysed industry figures on the number of mortgages that have fallen into arrears by 2.5 per cent or more of the mortgage balance, comparing the split between the buy-to-let and residential sectors and how each compare to the pre-pandemic market. The research found cases have risen from 4,930 in the first quarter of 2019 to 7,030 in the first quarter of 2023.
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“It’s certainly a worrisome time for the property market, with mortgage rates and high inflation stretching people’s affordability to the limit,” said Jonathan Samuels, chief executive of Octane Capital.
“It’s striking that buy-to-let landlords are becoming less shielded over time from the economic conditions, suggesting they are unable to entirely recoup their lost income in the form of higher rents. The research suggests levels of arrears are in no way out of control however, so there’s no need to be too doom and gloom about the state of the housing market.”
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A number of mortgage holders are likely to struggle when they remortgage, with typical five-year fixed mortgage rates now climbing above six per cent. To tackle this, Chancellor Jeremy Hunt is introducing a mortgage charter in a bid to reassure mortgage holders that their lenders will support them in these difficult times.
“The chancellor’s mortgage forbearance measures are designed to reassure people who are worried about the impact of rising rates, and it’s welcome these measures have been introduced before the horse has bolted – cases of arrears need to be tackled before people fall into trouble,” Samuels said.
“We’d still recommend mortgage holders to keep paying their loans as normal unless they are in need of emergency action, as measures like interest-only loans will only result in higher payments down the line to compensate.”
As part of the measures, anybody worried about their mortgage repayments will be able to switch to an interest-only mortgage for six months without impacting their credit score.
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