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How are late rent payments and cost of living crisis affecting landlords' BTL mortgage affordability?

Journalist: Andreea Dulgheru, Medianett Publishing

ended 19. January 2024

According to the latest data from Molo, Almost 60% of UK landlords have seen an increase in late rent payments, with property investors being owed on average £725.

In addition, over half (56%) of landlords have had tenants move out as they could no longer afford the rent, and a further 55% of landlords have reduced rents to support tenants during the current cost of living crisis.

I'm looking to speak to brokers about how these late payments, rent cuts and increased landlord costs are affecting their BTL mortgage affordability.

  1. How many of your clients have struggled with late rent payments or having to cut rents to avoid tenants moving out and thus prevent rental voids?
  2. How are these factors affecting landlords looking to secure a new BTL mortgage? Is this impacting affordability?
  3. As landlords are facing increased expenses due to cost of living crisis, inflation and additional expenses (for licensing etc), could these factors and the rent cuts lead to an increase in BTL mortgages in arrears? 


 

 

4 responses from the Newspage community

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Editor
Michelle Lawson
Director at Lawson Financial
Unfortunately, whilst it is a contributing factor, it isn't necessarily the cost of living making tenants not pay rent. It is the Government regulations and local Councils and the likes of Shelter who advise them not to pay or make themselves voluntarily homeless otherwise they won't be helped with alternative accomodation usually after a rent increase has been passed on. Those are usually tenants who have benefitted from potentially very low rents for a significant period of time. Landlords are penalised every which way financially and it is this ethos and the vilification culture is what really needs to change. Most landlords act with good intention and have been hit with higher interest rates, more taxes and more onerous burdensome regulation which doesn't help when obtaining mortgages due to stress testing.
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Gary Bush
Financial Adviser at MortgageShop.com
We are very concerned for a lot of landlords that we come across who are now suffering from rent arrears from their tenants. Having, in some cases, run successful arrears-free let portfolios for years along came the Covid Lockdowns, and the wheels came off the wagon. Having discussed this with a number of landlords they blame the UK government and insurers for this problem - firstly they feel that the government actively promoted that tenants, while on Furlough, not concern themselves with rent payments, and even took away their rights to seek recovery of their properties for about 18 months. They quote cases where long-term tenants have turned into debtors since April 2020, and who no longer take seriously the responsibilities of payment of their housing bills. Secondly, for those sensible landlords who insured their properties from rent arrears, it's now very difficult to find anyone who liked the outcome of contacting their insurance companies for assistance during lockdowns.
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Austyn Johnson
Founder at Mortgages For Actors
Depending on the lender, a lot iof them will understand the voids and ask of you have a repayment plan set up, for example, an extra £20 on the normal rent for the next year. Or something along those lines. You need to present to lenders, not just throw bank statments and forget. The real trouble is trying to get the higher LTV loans down when rents are low.
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Tahina Akther
Barrister and Co-Founder at Wildcat Law
Enquiries from landlords regarding rent arrears are up almost 4 fold versus the same time last year. When we speak to them we are hearing a common story that they are not able to absorb arrears as they had done previously, with many citing increased costs of borrowing and maintenance.
Regionally it is having a big impact regarding property portfolios with some landlords seeking to offload properties in areas that they had previously seen good rental yields as these are increasingly being eroded by expenses. Instead some investors are turning back to asset appreciation as the way to build returns in the longer run.