Concerning new research suggests that a number of buy-to-let landlords are finding it difficult to keep up with their mortgage payments.
Data released from the Council of Mortgage Lenders shows that mortgage arrears amongst buy-to-let landlords rose by 4% during the third quarter of 2016. This represented a rise from 4,700 to 5,000 landlords behind on payments and was the first increase since records were first collated two years ago.
Following a surge in buy-to-let activity early in 2016 ahead of the 3% extra stamp duty surcharge in April, less investors are now adding to their portfolios. Experts now fear that many buy-to-let investors, particularly first-time landlords, rushed into purchasing properties that they now cannot afford.
Richard Lambert, chief executive of the National Landlord Association, said: ‘Some first-time landlords may have rushed in to the market ill-prepared to beat the stamp duty hike. Unless landlords begin to make plans to mitigate the impact of these changes, it’s likely that buy-to-let mortgage arrears will continue to rise.’
The number of landlords that have fallen into arrears is leading to concerns that many more could fall into debt when further tax changes come into force in April. From this year, rules permitting landlords to offset their mortgage interest against tax will be phased out.
Higher tax bracket
It is estimated that as many as 440,000 basic-rate tax payers could be forced into a higher tax bracket from April 2017.
By April 2020, the phasing out will be complete, meaning it is likely that some higher-rate tax payers will only receive half of their current relief. The fear is that landlords will be left with no alternative but to pass on these increased costs to their tenants, in the form of higher rents.