Jules Birch
For months we’ve been told that the fundamentals of buy-to-let are still strong. This morning’s figures showing a 50 per cent increase in buy-to-let arrears in just three months show that they are anything but.
Bye to let
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The figures from the Council of Mortgage Lenders show that repossessions in the market as a whole in the third quarter were up 12 per cent on the second quarter and are on course for its forecast of 45,000 for the years as a whole (72 per cent higher than 2007).
The number of households in arrears was 8 per cent higher than in the second quarter and will is likely to exceed its forecast of 170,000 for the year (32 per cent higher than 2007).
But the figures also confirm that arrears among buy-to-let landlords are now higher than in the market as a whole for the first time ever. Up to now they have been significantly lower.
The rise in the last quarter was huge. Buy-to-let mortgages with arrears of more than three months rose 50 per cent compared with the second quarter to 18,000.
The repossession figures show no increase for landlords but this is only because of the different way that lenders treat buy to let. As a commercial loan, the lender has the power to appoint a receiver of rent to take rent directly from tenants. They can sell a property in the same way as a lender who gains possession.
The proportion of buy to let mortgages three months in arrears with a newly appointed receiver of rent appointed has quintupled in the last quarter - from 0.01 per cent of loans to 0.05 per cent. The total number with a receiver increased from 0.09 per cent (993) to 0.13 per cent (1,475). That’s on top of the 0.22 per cent actually repossessed (2,496).
The CML blames falling rents, an over-supply of rental property in some areas, fraud, inability to sell as an exit strategy and a tightening of buy-to-let lending.
For anyone who became a landlord recently, the fundamentals look shot to pieces.
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