Buy-to-let in figures: exactly how interest rate rises will hit returns
What would happen to your buy-to-let returns if Bank Rate rose to 1pc, 1.5pc and 2.5pc, respectively? These charts reveal the outcome
More than one in ten private landlords could be left with unaffordable mortgages if interest rates rise sharply, data published today shows.
In a scenario where Bank Rate increases to 2.5pc, this would leave more than 13pc of landlords with "insufficient" rental income to cover their mortgage, according to a report from Moody's, the ratings agency.
The Bank of England has maintained its key rate at a historic-low 0.5pc since 2009, keeping borrowing cheap and arguably fuelling a borrowing spree among Britain's booming buy-to-let sector.
Landlords now owe £201bn in mortgage debt, according to data from industry body the Council of Mortgage Lenders, while buy-to-let loans comprise 16pc of all property lending.
But this latest analysis of an £18.2bn sample mortgage loans shows interest rate rises could leave hundreds of thousands of landlords falling short of a key measure affordability.
Moody's used the typical method for calculating affordability that is used by lenders before they approve a mortgage.
The so-called "interest coverage ratio" demands that the gross rental income a landlord receives each year should be 125pc of their annual mortgage costs.
Because most buy-to-let mortgages are interest-only, this means the rent needs to completely cover the mortgage interest, plus a 25pc "buffer". Capital repayments are not required to be covered. (AtW's comment: WTF, capital repayment is optional???!!!)
Now, 1pc of landlords already fail to meet this key criterion, according to Moody's.
Source: Buy-to-let in figures: exactly how interest rate rises will hit returns - Telegraph
Got new 6 month fixed term contract signed with landlord, so will be waiting this one out
What would happen to your buy-to-let returns if Bank Rate rose to 1pc, 1.5pc and 2.5pc, respectively? These charts reveal the outcome
More than one in ten private landlords could be left with unaffordable mortgages if interest rates rise sharply, data published today shows.
In a scenario where Bank Rate increases to 2.5pc, this would leave more than 13pc of landlords with "insufficient" rental income to cover their mortgage, according to a report from Moody's, the ratings agency.
The Bank of England has maintained its key rate at a historic-low 0.5pc since 2009, keeping borrowing cheap and arguably fuelling a borrowing spree among Britain's booming buy-to-let sector.
Landlords now owe £201bn in mortgage debt, according to data from industry body the Council of Mortgage Lenders, while buy-to-let loans comprise 16pc of all property lending.
But this latest analysis of an £18.2bn sample mortgage loans shows interest rate rises could leave hundreds of thousands of landlords falling short of a key measure affordability.
Moody's used the typical method for calculating affordability that is used by lenders before they approve a mortgage.
The so-called "interest coverage ratio" demands that the gross rental income a landlord receives each year should be 125pc of their annual mortgage costs.
Because most buy-to-let mortgages are interest-only, this means the rent needs to completely cover the mortgage interest, plus a 25pc "buffer". Capital repayments are not required to be covered. (AtW's comment: WTF, capital repayment is optional???!!!)
Now, 1pc of landlords already fail to meet this key criterion, according to Moody's.
Source: Buy-to-let in figures: exactly how interest rate rises will hit returns - Telegraph
Got new 6 month fixed term contract signed with landlord, so will be waiting this one out
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