The National Landlords Association (NLA) was due to be called to appear before the House of Commons Treasury Select Committee this week.
As part of the Committee’s new inquiry into mortgage arrears and access to mortgage finance, the NLA has been asked to give evidence on how landlords have had significant difficulties in buying and selling property as well as refinancing existing portfolios. Where limited mortgage finance is available, landlords have to offer far higher deposits with average loan-to-value (LTV) around 70 to 75 percent.
The NLA will also explain that, along with the wider mortgage market, lending criteria have become stricter.
With the increase in arrangement fees and the reduction of interest only mortgages, the consequence is that those considering entering the market for the first time are finding it almost impossible to find appropriate mortgages and are unlikely to become landlords using the conventional channels.
NLA chairman, David Salusbury, said: “We are in no doubt that the lack of availability of mortgage finance is having severe consequences for landlords across the UK.”
With over 25 percent of landlords saying they would like to seek finance during the next quarter, this dearth of buy to let products is strangling the market.
“Together with colleagues from across the property industry, we very much hope to be able to show the Treasury Select Committee clear evidence that the increase in mortgage arrears and repossessions comes as a direct consequence of a rise in rental arrears.”
The NLA also lent its support to a recent article published at lovemoney.com which suggests that landlords should not be treated like pantomime villains.
The article, written by John Fitzsimons, stated: “We need a strong rental sector…our blasé attitude towards the plight of landlords is not a good thing. Too often we overlook the fact that a strong rental sector is essential.
“Home-ownership is not a right, nor is it right for everyone. And while the social rental sector does a good job, I think it is vitally important to have an equally strong private rented sector, to help take the pressure off the state.
“I like the idea of a buy to let version of the Homeowner Mortgage Support Scheme. Under the current scheme, mortgage owners are able to defer interest payments on their mortgages for up to two years. Why not extend this to buy to let? Landlords on the whole do a great and invaluable job, and our property market needs them – there are currently more than one million buy to let mortgages in place. That’s a lot of landlords at the mercy of circumstances beyond their control.”
Salusbury, speaking about the article, said: “This recession has already claimed a growing but small number of landlords who have faced severe financial difficulty. The bigger picture is of a rental sector which is growing and making an ever-more important contribution to the overall housing mix.
The UK needs a strong rental sector and this article makes a clear case for offering landlords sufficient space to try and deal with their financial problems. By moving quickly to repossess properties owned by buy-to-let borrowers, the problems of pressure on social housing and increased homelessness will not go away.
“NLA research published in March 2009 indicated that in the previous six months around 44 percent of landlords had experienced some form of rental arrears. Although during economic turbulence many people struggle financially, this level of non-payment of rent can have direct and severe consequences for both landlords and their tenants.”
