Fitch Ratings is warning that the heavy presence of buy-to-let borrowers in urban centres could trigger a deterioration in the wider market.
In a two-part report entitled Demystifying UK buy-to-let, Fitch says the strong concentration of buy-to-let mortgages in cities could contribute to destabilisation in the market.
It says if investors lose con-fidence and sell off properties quickly there could be an oversupply of homes leading to a fall in prices.
The report suggests that London and its surrounding areas are particularly vulnerable because the region accounts for nearly 45% of the UK’s buy-to-let mortgages.
The report also claims that if conditions such as those seen in the recession of the early 1990s are repeated, portfolios with a high percentage of London-based buy-to-let loans may perform worse than those without.
The report states: “The effect of such a decline is a largely untested scenario. There is the risk that, confronted with declining capital values, substantial numbers of buy-to-let in-vestors will leave the market. This would increase housing supply and place further downward pressure on house prices.”
Gus Park, director of intermediary sales at Mortgage Ex-press, says: “It is Fitch’s job to draw attention to risk but I don’t think an exodus is likely.
“There is an army of professional landlords looking to buy but unable to get funding. I think we will see properties shifting from amateur landlords to professionals.”
He adds: “As long as there are good long-term reasons to invest – and there are – there will be investors ready to snap up properties.”