17-07-2007
Top tips for struggling landlords
Buy-to-let mortgages are now easier than ever to obtain, as many lenders have loosened their criteria. But some landlords could start to find their mortgages a weight around their neck if interest rates keep rising.
According to independent mortgage advisor John Charcol, this has helped to counter-balance the fact that rising interest rates have made mortgages more expensive.
Ray Boulger, senior technical manager at John Charcol, commented: "In terms of people actually getting a buy-to-let mortgage, it is now less difficult for people to get a mortgage because of the way lenders have relaxed criteria.
"For those who have already got that mortgage, clearly they are under the same pressures as people in the residential market and they are going to have to pay more, however they will not be able to claim more rent," he added.
Buy-to-let landlords who find themselves getting behind with their repayments are given the following advice:
• Contact your mortgage lender as soon as possible to try and negotiate. They may be able to arrange a longer term or even a different product which could make repayments more manageable.
• Shop around for a more competitive quote for buildings and contents insurance as you may be able to save money here.
• Try to eliminate periods when your property stands empty. Start looking for new tenants as soon as your old ones warn you that they are moving on, and pressure tenants for a decision as to whether or not they plan to extend their lease well before it is due to run out so that you know whether or not to advertise for new tenants.
• Don't assume you can escape your debt by raising rents. Tenants know how much they should be paying for a particular property and will simply move on, leaving you in an even worse situation.
Frank Wessely of financial advisory group Vantis warned: "Buy-to-let has boomed in recent years, but supply is outstripping demand in certain areas.
"Higher interest rates and over-optimism about rental income have left some buyers struggling to keep up repayments. We would urge investors to talk to their mortgage provider immediately if they have concerns."
However, the good news is that most analysts don't expect the buy-to-let sector to be hit particularly hard by the recent rises in borrowing costs.
Council of Mortgage Lenders spokesman Bernard Clarke comments: "Everyone will suffer to the extent that their borrowing costs will be higher, but we don't expect there to be any significant rise in arrears and possessions in the buy-to-let sector."
Mr Clarke reveals that arrears are in fact running at a lower level in the buy-to-let sector than in the mainstream mortgage market. "The mainstream mortgage market, historically, has itself had a very low level, so we don't see any major problems with buy-to-let investors."
See if Simply Business can get you a better deal on your mortgage. We have relationships with top lenders and could find you a cheaper rate. Once you've compared quotes we can also take you through the (re-)mortgage process - it's quick and easy with Simply Business.
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