Buy-to-let investors are struggling to remortgage after failing their lender’s affordability test, which could force one in three landlords to sell their properties. According to research conducted by buy-to-let specialist Mortgages for Business, some landlords are accepting variable rates as high as 9.5%, while others are selling their properties because they can no longer afford their loans. The situation is critical for small landlords as they are worried about Section 21 reform, Energy Performance Certificate (EPC) regulations, tax, and higher mortgage rates, said Gavin Richardson, the managing director of Mortgages for Business.

Richardson noted that landlords are coming off rates of 3.5% and being unable to remortgage because their loans are no longer affordable under the lender’s stress test. As a result, their loans are reverting to the lender’s standard variable rate, which averages about 7.5%. In the worst-case scenario, they are moving to their lender’s standard variable rate at rates as high as 9.5%. The only other options for landlords are to pay a large fee to secure a more reasonable interest rate or sell up and go home.

For instance, a landlord charging £1,200 a month rent with a mortgage of £225,000 coming off a fixed rate of 3.99% would now be offered a remortgage of £180,893, based on a rate of 5.49%, falling £44,000 short of the loan amount they need to remortgage. To be accepted for a remortgage of £225,000, the landlord would have to increase the rent they charge by nearly £300 to £1,495.

Richardson suggests that landlords seek brokers to find the best deals, and some lenders offer landlord borrowers product transfers, a new deal without asking them to pass a new stress test. Others will allow borrowers to remortgage back to them at reduced fees, while a few are actively looking at ways to help. However, not all lenders are providing support as the money markets are proving tricky for them to navigate, and many are sticking with “computer says no.”

In conclusion, the buy-to-let market is facing a critical situation, and small landlords are worried about the impact of the Section 21 reform, EPC regulations, tax, and higher mortgage rates. The struggle to remortgage is adding to their worries, and many are forced to sell their properties. The advice for landlords is to seek brokers to find the best deals and check if their lender is offering product transfers or reduced fees for remortgage.