Buy-to-let mortgages facing negative equity

Date:Tuesday 18th November 2008
Author: Max Freedman

As many as 40 per cent of buy-to-let mortgage holders could be in negative equity by the middle of next year, a new report has claimed.

The Telegraph reports the research by credit agency Standard & Poor, which studied 200,000 securitised buy-to-let loans.

It found that 3.7 per cent were in arrears at the end of June.

The newspaper explains how many borrowers tried to capitalise on booming property prices and increasing rental values in the years before the credit crisis.

But when lenders restricted mortgage deals, such as 100 per cent loan-to-value ones, owners still had to keep up the payments.

Writing in the Independent, David Prosser explains that short-term mortgage deals were at their cheapest at the height of the buy-to-let boom.

As those offers reach their conclusion, the best deals now are twice the price.

Meanwhile, the Royal Institution of Chartered Surveyors (Rics) reports that would-be sellers "flooded" the rental market with properties that cannot be sold in the third quarter of the year.

This created a "glut of supply" that has caused rental prices to drop.

Rics reports "historical highs" of surveyors reporting new instructions to let flats and houses.