New landlords face a difficult time

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A report has raised fears that many landlords face the prospect of not receiving enough from their properties to cover their mortgage payments.

The Telegraph newspaper has seen a report from Arla which indicates that rental returns from most properties have fallen below the cost of the average buy-to-let loan.

According to the paper, the document also shows that 67 per cent of landlords were making rental returns of five per cent or less in August. However, most mortgages available to landlords have rates of at least 5.09 per cent, suggesting that these investors could face a shortfall.

However, the paper adds that this problem is unlikely to hit long-term investors who have already paid off much of their borrowing. As a result these landlords "will probably be sitting on substantial profits because of the property price boom of recent years".

What is worrying is the idea that many of the people who have recently entered the buy-to-let market could opt to sell.

Tim Warrington of landlord.co.uk told the paper: "Too many landlords selling in the UK could send the property market into freefall."

Recently, a spokesperson from Arla said that a slowdown in house prices could encourage more people to rent while they waited for the market to stabilise.

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