Interest rate rises would clobber one in three landlords

Despite little sign of interest rate rises, they remain a concern for almost one in three landlords.

Most pundits do not now believe that interest rates will go up this year, and there is even speculation of a further drop next. Lenders, who rely on swap rates rather than what the MPC decides, have recently been cutting rates.

But 31% of private landlords in a new poll agree or strongly agree that they are worried about their ability to meet their mortgage payments should rates rise.

According to a panel of 662 landlords questioned by market research firm BDRC Continental, almost half of landlords (47%) have at least five buy-to-let mortgages on their portfolios and 73% have at least one.

The average total mortgage comes to £477,060.

The research reveals that BTL mortgage interest rate rises would present a financial challenge to many private landlords.

Faced with two possible interest rate rise scenarios, few landlords feel they would be insulated from the impact.

While a 1% increase would have a significant negative impact for 29% of private landlords with BTL mortgages, a 2% rise would create a significant impact for 53%, with 8% being forced to re-evaluate their future as a landlord, and 6% having to reduce the size of their portfolio or leave the private rental sector completely.

The research shows that one in seven private landlords have taken out a BTL loan in the last year – one-third to fund the purchase of another BTL property, one-third to get a lower interest rate and the remaining third for other reasons, such as to move from a residential to a BTL loan, obtain a fixed rate, or to fund development.

Just under a half (49%) of the landlords strongly agree that the market would benefit from more BTL lenders / greater competition, although 59% agree or strongly agree that they are satisfied with their current lender.

For 44% their choice of BTL lender was determined by the lowest interest rate, while 40% based their choice on advice from an intermediary.

Mark Long, director at BDRC Continental, said: “Year on year, private landlords are increasingly optimistic about the private rental sector. However, fears over potential interest rate rises are very real.”

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30-August-11General Lettings News