Partner Article

Landlords need to review mortgage options

This week the FSA reported that an estimated 300,000 people with interest-only mortgages have missed at least one payment.

The figure was announced at the same time as some of the biggest lenders increased their standard variable rates (SVR).

Ajay Jagota, managing director at KIS Lettings, said the figures are concerning for landlords with buy-to-let interest only mortgages especially with lenders like Halifax and Bank of Ireland pushing up their SVR and others rumoured to be on the verge of following suit.

He said: “Now is the time for landlords who are coming to the end of a fixed term mortgage agreement or who are currently on a SVR to consider their options and plan to secure a financially sound future.

“As some of the largest lenders increase their mortgage rates, landlords will start to feel the pinch, and it might be in their interest to seek a health check from a qualified financial expert.”

Investors who are looking to move into private rentals for the first time need to also be mindful of mortgage rates, says Ajay.

Ajay said: “Now is a great time to move into the property market as a buy-to-let investor. Property prices are low and rental demand is high. But those taking out a buy-to-let mortgage for the first time need to consider the mortgage variables and take into account possible future changes in the market.

“They may have the ability to put down a larger deposit to secure a lower rate; something worth taking into account when you consider the variables they will come across as a landlord.

“While rents are in demand at the moment, I always advise to look at the investment and what would happen if average rents dropped by 10 or 15 percent. If demand drops, will finances support mortgage payments where a void lasts longer than three months? And if LHA payments are reduced, changed or capped, as has already happened, will this affect your ability to let the property at a viable rate?”

Ajay explained that landlords with property in different areas of the country face differing factors and here in the North East the heavy reliance on public sector jobs and their imminent cuts are more than likely to have a knock on effect in the housing market.

He added, “Many of the public sector job cuts that were announced last year will take place in 2012. It’s hard to know how this will affect the property market and private rented sector until the full effects are played out, which may take a further 12 to 18 months taking us into 2013/14.”

This was posted in Bdaily's Members' News section by Ajay Jagota .