Landlords struggling to cover mortgage payments
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Four out of ten landlords admit they would not be able to cover mortgage payments on their properties if interest rates increased by 2%.
A Spareroom.co.uk poll of UK landlords reveals 41% of landlords barely get their mortgages covered by rent payments.
And 43% confessed that when interest rates rise by 2%, then the rents would no longer cover their mortgages.
A total of 22% of landlords say that a rate rise of just 1% would mean that rents would no longer cover their mortgages, and for 10% of landlords just 0.5% would create a rent-mortgage shortfall.
The poll also reveals 63% of landlords have been forced to hike monthly rents since the start of the year.
One in five are increasing or planning to increase rents by an 5% this year, with 18% factoring in an increase of between 3% and 5%.
But more than half are worried that by hiking rents they could lose tenants.
Matt Hutchinson, director at Spareroom.co.uk, says: “Britain’s landlords are in a Catch 22. On the one hand, the rise in Capital Gains Tax for higher rate taxpayers means that many landlords either won’t be able to sell their buy-to-let properties full stop or will sell at a far greater loss. At the same time, holding onto their properties means they are at the mercy of the Bank of England and facing higher mortgage payments.”
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Readers' comments (12)
Anonymous | 14 Jul 2010 1:32 pm
I'm sorry, I didn't realise that buy-to-let landlords were charitable institutions!!!! It's called risk-taking and guess what!!! That's right!! It isn't always a win win situation. Get real.
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john the renter | 14 Jul 2010 2:29 pm
I've already forced my landlord to reduce the rent once, when it comes up for renewal It'll be reduce it again or I leave. There are so many overpriced empty flats around Upminster he always has the choice of a nice empty BTL on his portfolio of debt.....
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Anonymous | 14 Jul 2010 2:36 pm
There is a saying that greed is a sin.
Landlords got greedy now is time to pay for the sin.
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Jo B | 14 Jul 2010 2:50 pm
If the mortgage becomes unaffordable then just sell the property. It's better losing everything.
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Anonymous | 14 Jul 2010 3:18 pm
Why let the facts spoil a good headline...the findings actually confirm that landlords can afford their mortgages! The exact opposite of the headline.
Maybe when rates do actually rise the article can be dusted off and published again!
The green eyed tenant comments are all slightly premature! The stats say 63% of landlords have already increased their rents, and could only have done so had there still be tenants willing to pay!
As for the CGT comment...I'm lost how a tax on GAINS can possibly result in landlords making 'a far greater loss'? No tax applies without a gain!
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Geoff Laird | 14 Jul 2010 5:06 pm
Any prudent landlord should ,if advised correctly, have put any available rental surplus after deductions of normal living expenses into a "Rainy Day Account" to protect themselves from any possible increases from the exisiting interest rates;with many landlords having mortgages with low premiums above bank base or libor I would actually believe that stress testing most loans would still allow the mortgages to be paid even if rates were to increase by at least 2 or 3% and rentals remained static, if the figures do not stck up then sell, I certainly have a number of investors waiting in the wings to take full advantage of such unfortunates.
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Andy R | 14 Jul 2010 5:14 pm
I can't wait for rates to go up - at present the value my savings is diminishing whilst BTL landlords get away with ridiculously low ~interest rates - and they panic they can't handle another measly 1%!
I am fed up of careless people who can't handle money and don' leave themselves any leeway. That is Labour's legacy.
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Anonymous | 14 Jul 2010 5:40 pm
Repossess them NOW. Stop stealing my taxes, and stealing my Interest Rates on savings, QE, printing money, devaluing the pound in my pocket.
Savers are in effect paying for this toxic mortgage debt, or YOUR houses, which many LIED to buy. [42% slf cert in the UK]
Lying Stealing banks, incompetent governmnet.
Your Industry is completely disgusting.
Meanwhile we cannot afford a bedsit for a decade, and have been forced to waste tens of thousdands in rent. to Unscrupulos landlords who lied, and were encouraged to lie by the likes of Bradford and Bingley, who the taxpayer bailed out in the sum of £50billion.
First Time buyers will not be buying until their is at LEAST a 50- 60 % reduction.
Get real, or get lost.
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Russell Duke | 14 Jul 2010 6:16 pm
Land lords and free holders should be paying the council tax too! even on student properties!! Then we need to introduce a land value tax instead of taxing wages and saving!!We ll not have a housing shortage then!!! Scum!!
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John | 14 Jul 2010 7:24 pm
I am selling out now. Asking prices are falling fast where I let my properties, but I'll take the hit and still walk away with something (bought most of mine in early 2000).
Yield is rubbish on residential property bought recently; better investments elsewhere at the moment.
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