You’re probably aware of the uncertainty in the property market, some people are holding off on decisions until after the general election and Brexit. How is all this affecting landlords owning buy-to-let properties?
In the third quarter of 2018, 570 buy-to-let mortgaged properties were repossessed, but this has risen 40% to 800 in the same quarter of 2019. Furthermore, in the 3rd quarter of 2019 we saw 4,550 in arrears of 2.5% or more of the outstanding balance, compared to 5% lower in 2018.
The number of landlords in arrears of 5% – 7.5% of the remaining balance on the mortgage dropped by 21% over the last year, however those in worse trouble at 7.5% – 10% of arrears increased by 9%. There was a drop of 1% of landlords in arrears over 10% of the outstanding payments.
It’s not clear what has caused this rise in repossessions, but it could partially be due to a historic backlog. There were changes to the requirements for mortgage lenders calculating how much a borrower owes them each month if they go into arrears. This alteration came into play two years ago and resulted in mortgage lenders individually reviewing many cases and applying for repossessions.
Alternatively, this increase in buy-to-let repossessions could be down to mortgage interest relief changes, regulation costs increasing, and longer time frames to repossess a property.
Buy-to-let repossessions often result in the current tenants being evicted, meaning they are forced to leave their home through no fault of their own.
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Landlords are selling up
Studies have shown that around one third of private landlords are considering selling a minimum of one property over the following year. 6 months before, it was just a quarter of landlords in this position, so the increase is of around 8%.
Two years ago 18% of landlords planned to purchase at least one buy-to-let property, but this has dropped to 13%. Recent tax changes adding to costs is causing landlords to sell up and fewer to buy more properties to rent out.
For the past 3 years, the number of people becoming new landlords has been decreasing, but why is this?
There have been several changes to regulations and taxes since 2016. One of the most hard-hitting changes was when a 3% surcharge in stamp duty on buy-to-let house purchases came into practise. On top of this, there is the decrease in mortgage tax relief.
Another decrease in the buy-to-let market is the number of accidental landlords; landlords who didn’t intent to let their property out but did. This has dropped for the first time in 5 years. It’s caused by home owners unable to sell and move, so keep the original house as an investment and rent it out. Around 1/14 landlords are accidental.
What if the property you’re renting is repossessed?
If you’re unfortunate enough to be living in a rental property which is getting repossessed, your landlord’s mortgage lender will send a letter to your address once they receive a date for a court hearing. If the lender applies for a bailiff’s warrant, they have to send a second notice at the time. The earliest they can evict is 14 days after the second notice. You’re able to ask for an extension to the eviction, and if approved you may be asked to pay the mortgage lender your rent rather than the landlord.
I began writing for Property Press Online in October 2019. Particular areas of interest are housing market news and new developments in the market.