Landlords 'may have problems if mortgage lenders increase rates'

Date:Wednesday 10th June 2009
Author: Susanna Kavka

Landlords in the UK may run into repayment problems if lenders increase the rates they charge on mortgages, the chairman of the Residential Landlords Association (RLA) has said.

According to Alan Ward, some banks and building societies may raise their interest rates as property prices fall.

Some mortgage agreements enable lenders to alter their rates if the loan-to-value ratio changes substantially.

For example, an 80 per cent home loan on a property worth £100,000 would become a 100 per cent loan if the home dropped in value by £20,000.

Commenting on the issue, Mr Ward said: "It is a bit of a threat not just to the landlord, but to the tenant also. If the landlord is being threatened by the lender and has no alternative but to sell the property, where is the tenant going to go?"

He added that, while the RLA does not know the extent of the trend for rate increases, it is becoming more "apparent and common".