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Debt is being cemented as a feature of Britain’s buy-to-let housing market, as the number of landlords three months behind on their mortgage has hit 10,000. The reported estimate from Hargreaves Lansdown is the first sign that some may be forced to sell-up prematurely if their monthly payments become unaffordable. Worryingly, the IFA tipped the number in arrears to increase in the next months, as the ‘little or no interest’ deals they agreed in 2006 or early 2007 are due to expire. Giving them even less room for financial manoeuvre, landlords who slip off cheap initial rates are now unlikely to be able to remortgage for the same loan-to-value. Not only have mortgage rates risen since the credit crunch, but falling house prices averaging 10% threaten to push those who bought in 06/07 closer to negative equity. “Borrowing to invest can be a hazardous strategy, just as much with property as with any other form of investment, because you magnify losses as well as gains,” said Laith Khalaf. pensions analyst at Hargreaves Lansdown. “This was as true 10 years ago as it is today, and will be in 10 years time when everyone has forgotten the current credit crisis. For the overwhelming majority of the population, buy-to-let should not be seen as an alternative to making regular savings into a pension.” When using historic rates of return, a pension invested in an equity portfolio would return more over 25 years than a buy-to-let property over the same period, Hargreaves’ data reportedly shows. Obtained by The Daily Mail, the full research indicates that £1 put into a buy-to-let property, with a 75% loan to value, over the past 25 years would now be worth £3.63, compared to its worth in a pension of £3.98. While such long-term investors are best-placed to weather any further stresses in the buy-to-let market, the credit crunch has cut off the entrance to those looking to follow their success. Criteria to secure buy-to-let mortgages have been toughened, and their availability has contracted, with reports from Moneysupermarket.com that the number of packages has fallen 97% over the past year. Aug 18, 2008 Email this article Printer friendly page Previous Page
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