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Arrears in the buy to let sector are worsening at a faster rate than for homeowners.
Octane Capital analysed industry figures on the number of mortgages that have fallen into arrears by 2.5 per cent or more of the mortgage balance, comparing the split between the BTL and residential sectors and how each compares to the pre-pandemic market.
Cases of buy to let arrears of more than 2.5 per cent the loan amount have risen by 42.6 per cent in four years, rising from 4,930 in Q1 2019 to 7,030 in Q1 2023.
Over the same period cases of arrears for homeowners of more than 2.5 per cent have actually declined by 8.6 per cent from 83,870 in the first quarter of 2019 to 76,630 in the equivalent quarter this year.
Octane says this suggests that fewer landlords are being shielded from the current economic climate, with both mortgage rates and energy prices increasing at a faster rate than rents.
Overall it’s more common for residential homeowners to struggle however.
In the first quarter of this year there were some 76,630 homeowners in arrears of 2.5 per cent or more of their mortgage balance. While small, this accounted for 0.87 per cent of total homeowner loans outstanding.
This proportion has hovered around this mark for the past four years, peaking at 0.94 per cent during the first quarter of 2021.
In contrast, the number of landlords in arrears of 2.5 per cent or more of their mortgage balance totalled 7,030 during Q1 of this year and accounted for 0.34 per cent of total outstanding buy to let loans.
While this proportion is more than half that of owner-occupiers, it is the highest total number seen since Q1 2019, as well as the highest proportion of all BTL loans with the exception of Q4, 2022, when it also sat at 0.34 per cent.
Octane chief executive Jonathan Samuels says: “It’s striking that buy to let landlords are becoming less shielded over time from the economic conditions, suggesting they are unable to entirely recoup their lost income in the form of higher rents.
“The Chancellor’s mortgage forbearance measures are designed to reassure people who are worried about the impact of rising rates, and it’s welcome these measures have been introduced before the horse has bolted - cases of arrears need to be tackled before people fall into trouble.
“We’d still recommend mortgage holders to keep paying their loans as normal unless they are in need of emergency action, as measures like interest-only loans will only result in higher payments down the line to compensate.”
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Well we have an option that home owners don’t 🤔🤔 sell the lot and enjoy the capital, and we still have our own home to live in 🎉🎉💰💰 if something doesn’t work out then change it, stop flogging a dead horse 🐴
Absolutely.
As owner occupiers we have a strong incentive to maintain a roof over our own heads, irrespective of how much it costs us.
Our only incentive to maintain a roof over tenants' heads is if we can make an acceptable return on our substantial investment whilst so doing.
That incentive disappears when the ROI is no longer acceptable and with it goes the tenants' chances of remaining in our properties.
Higher interest rates on top of the withdrawal of tax relief and the threat of indefinite tenancies will no doubt be the last straw for many highly geared Landlords.
I'm neither buying nor selling in the current climate but, some six years into the fall out from the SNP anti PRS legislation, I no longer rent to anyone except groups of students who won't stay long term and where I can continue to ensure my rents match my properties- at the top end of the market.
This Tory government know best clearly.
In cahoots with just as useless Bank of England for quantitive easing , which lets face it was the biggest mistake of all. Then keep putting up interest rates, which only affect variable mortgages and new lending. Hurts property owners and small businesses whom have borrowed to grow.
And lastly from our perspective, astoundingly poor judgement from how to make the property market balanced for all. I am just so fed up with this Government, but who to vote for, bring back the raving looney party.
Firstly the tenant tax, Section 24 and now tenants to be made homeless with Landlord's unable to run a profitable business. 40% CGT on it's way and from Question Time now suggestions that we should pay National Insurance on this money.
Complete failure from the Tories, complete mismanagement and no idea on what to do about inflation.
Fingers crossed that inflation drops next month!
Once CBDC kicks in we'll look back at these days as the good old days
The government will own everything and you'll be happy or else
Just imagine, a LL who has served a S8 notification after two months rent arrears, then submits a PO after two weeks.
The PO is still pending after 3 months due to court backlogs, with no confirmed date and the tenant is still residing at the property, with no rent payments. Now we're talking 5 months of arrears for the LL. (Accelerated PO's are not permitted for S8 only for S21)
This is the true picture of what LL's are facing, whilst all these analysts are acknowledging the statistics, at the same time, they're failing to identify the actual cause of the problems in the first place and what immediate measures can be taken to address, prevent and protect those LL's who have become victims of neglect, when your only main focus/concern is on a reform bill that only focuses on the RENTER's who are indirectly causing these figures to spiral with NON PAYMENT OF RENT to their LL's!
We are on our way to communism. Capitalist country is now dead. No property business for individual, just huge corporations and the banks. This government and labour wants to control us that is the only way out for them to stop looking after the vulnerable and single mothers, people with disabilities and pass these responsibilities to the unsuspecting landlords. It is government corruption that they are making some new laws totally against the landlord. Government is real culprit here. They are making some corruption as law. Tenants can legally stop paying rent, can damage the place and blame it on the landlords. The tenanted property needs work done every 2 or 3 years. Owner occupied can be a gradual process and once done it can last over 15 years. No gas or electrical certificates for owner occupier, no worries about EPC until they sell. Tenanted properties need to be safe, I believe. However, in return it is paramount that the tenants pay rent, otherwise they should be out within a 14 to 28 days. Tenants need not have stress, the landlords do not need any stress, if it is not their fault. It takes a lot to get the work to a good standard for the tenants and if they cannot look after the house and pay the going rent, then they should be homeless, go out in the streets. We all need to take our own responsibilities and the ones who cannot or will not, it is the government's responsibilities and liabilities. No government should push these on hardworking and responsible landlords, who help and support their tenants in every way they can. I have students and professionals both. Apart from some students destroying their home before they leave, it works well. I have to have workmen ready to do all the work that needs to be done with a loss of rent for anything between 2 weeks and to a month. I am more worried about some people leaving within 2 to 3 months of renting. I know students will stay. But recently I had an enquiry of renting 2 months and I had to say no. However, in future you would just deposit their money and then they will leave without paying rent for the last 6 to 8 weeks. This has happened the tenant stayed almost 10 months and said they will not pay 2 months and to take it from the deposit. No rent for 2 months and cleaning and all work left has to be from landlord's expenses. The law will work if tenants and landlords are both responsible and carry out the "Right to Rent" as both parties responsibilities. Throwing everything at the landlord is a short term solution, whilst the landlord cannot sell. Long term, they will sell and not necessary to the landlords.
I totally agree with you Vibha and I fully appreciate the way you addressed the responsibilities of the "Right to Rent," being a shared responsibility, rather than the landlords as I mentioned the same thing in my campaign.
The Right to rent involves data protection, whereby the tenant's date of birth and NI number is required.
In addition to that, the "Right to Rent," certificate has an expiry date and has to be renewed periodically. You have to also produce this document before commencement of an agreement and upon each renewal.
Failure to do this, can result in a fine of £1K and £3K for repeat offender's.
This is the reason why I went on to "Change dot org," to campaign for "Tenant's licensing."
It should be mandatory and statutory for all Tenant's in England and Wales to produce an Insurance certificate before commencement of a tenancy agreement and upon each renewal.
The pet insurance will be separate and I would like to see a Tenant's Licensing brought into effect, that will produce a basic fundamental understanding and requirements with an accredited certificate that will be presented to the LL's along with their insurance certificate and Right to Rent documentation.
They should also implement a credit score that will show the tenant has intentionally defaulted on rent arrears, so that when they look for good LL's in future, we can ignore them due to not meeting a set criteria.
Please search for Tenant's Licensing in "Change dot org."
Simon my friend we older long term landlords don’t have that option.
Sell now and pay 28% c/gains tax on our life’s times work, even though we have paid tens of thousands every year for decades, die in a few years another 40% taken out of the remnants of whats left of your Est’ that’s 68% so we are held to ransom no exit plan allowed, don’t worry the Rogue’s Council’s will send the staff out when ever they feel like to fine you £20 / £30k in the mean time to keep them in free living.
Yes Vibha, very true.
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