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Rapid Rise in Buy-to-Let Mortgage Arrears Outstrips Residential Sector, New Study Reveals

The latest analysis from property lending specialists, Octane Capital, indicates a surge in arrears for buy-to-let landlords outpacing that of homeowners.

Octane Capital scrutinised the industry figures on mortgages falling into arrears by at least 2.5% of the mortgage balance. They compared the trends between the buy-to-let and residential sectors, contextualising these figures against the pre-pandemic market.

Cases of buy-to-let arrears exceeding 2.5% of the loan amount surged by 42.6% over the past four years. The figures rose from 4,930 in Q1 2019 to 7,030 in Q1 2023. Meanwhile, homeowner arrears exceeding 2.5% actually dropped by 8.6% over the same period, reducing from 83,870 in the first quarter of 2019 to 76,630 in the same quarter this year.

These findings suggest that fewer landlords are weathering the current economic conditions, which see mortgage rates and energy prices rising at a pace that exceeds rent increases.

However, residential homeowners still face higher risk. During Q1 this year, 76,630 homeowners were in arrears of at least 2.5% of their mortgage balance, accounting for 0.87% of total homeowner loans outstanding. This figure has remained fairly consistent for the past four years, with a peak of 0.94% in Q1 2021.

Contrarily, landlords in arrears of 2.5% or more of their mortgage balance totalled 7,030 in Q1 this year, which represented 0.34% of total outstanding buy-to-let loans. While this proportion is considerably lower than that of homeowners, it’s the highest total number and proportion of buy-to-let loans since Q1 2019, barring Q4, 2022, where it also stood at 0.34%.

As arrears rise but remain manageable, mortgage holders are anticipated to face difficulties when they remortgage, given that typical 5-year fixed mortgage rates are now surpassing 6%. Chancellor Jeremy Hunt aims to reassure mortgage holders by introducing a mortgage charter, ensuring lenders’ support during these challenging times.

The charter allows mortgage holders concerned about their repayments to switch to an interest-only mortgage for six months without affecting their credit score. Moreover, no customer can be repossessed until 12 months after their first missed payment, giving them a chance to reorganise their finances.

CEO of Octane Capital, Jonathan Samuels, expressed his concerns about the property market as high inflation and mortgage rates stretch affordability. He noted the particular vulnerability of buy-to-let landlords, but also pointed out that arrears are not out of control, and thus, extreme pessimism about the housing market is unwarranted.

He praised the Chancellor’s preemptive measures to reassure those worried about rising rates. Despite this, he advises mortgage holders to continue their repayments as usual unless faced with an emergency, as opting for measures such as interest-only loans would result in higher payments down the line.


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