This article in the Financial Times speculates on the fragility of many buy-to-let property investors and the risks of high levels of negative equity in the sector because of the high percentage of landlords who are on interest only mortgages.
It starts to question the presumed logic from the industry that landlords were less exposed to risk than direct homeowners.
I have posted on a number of occasions that the BTL mortgage market could be harbouring a second bubble, a bubble within a bubble if you like.
This smaller bubble has been created by landlords supplementing rental losses with other income or through the re-financing of other assets. The question is whether this inner bubble can be sustained by landlords as property prices continue to fall, rents continue to fall and redundancy rise.
The risk is, if this inner bubble does pop it would bring multiple properties into repossession for each individual who can no longer with stand the financial burdens.
The scale of this inner bubble is currently remaining hidden from surveys and research as many individual landlords try to front it out, through both embarrassment and pride.
The report from Standards and Poor's shows that approximateley half of all outstanding BTL mortgages show higher levels of arrears than those dating from earlier, before lenders relaxed underwriting standards. See FT article
No comments:
Post a Comment