The government and mortgage lenders have agreed a new mortgage charter to help out homeowners struggling with repayments – but buy-to-let mortgages aren’t covered, leaving landlords out.
This has been criticised by industry groups like the National Residential Landlords Association (NRLA), as well as by the Labour opposition.
But landlords aren’t missing out on very much. The new mortgage charter means that homeowners will be helped to renew mortgages at the best rate available, without further affordability checks. They will also be able to extend their mortgage term or temporarily switch to an interest-only mortgage to reduce payments without affecting their credit score. And lenders have agreed not to force repossessions within 12 months of the first missed payment.
More impactful interventions for landlords – like bringing back tax relief on mortgage payments, as the NRLA has suggested – haven’t been commented on by politicians.
What can landlords do – and how can agents help?
Homeowners have been hammered with interest rate rises this year, and landlords are no exception. The average buy-to-let mortgage interest rate reached 6.5% this month, meaning that anyone remortgaging from the rates of two or five years ago is in for a big shock. A 25-year, £150,000 interest-only mortgage would have cost £313 per month in 2021 at 2.5% interest. Renew that at 6.5% today, and it would cost £813 per month – a £500 rise.
But unlike homeowners, landlords can pass on at least some of their increased costs to tenants. According to Aneisha Beveridge, Head of Research at estate agency group Hamptons, rents rose 9.1% year-on-year in May largely because of higher mortgage rates. Landlords can also ask renters to provide guarantors to secure their cash flow – an option more of them are now taking.
Letting agents can help landlords through this challenging time by keeping them informed of current market rents. Rents have risen quickly enough that landlords may not have kept up, especially within an existing tenancy. PayProp’s management reports let agents quickly benchmark their rents against the local market.
Additionally, agents can help landlords understand their options for rent guarantees. As well as asking applicants to provide a guarantor, agents can refer them to third-party rent guarantor services. They can also help landlords to put together guarantor agreements that will hold up in court.
Other landlord headlines
Leading lawyer asks landlords for help overturning ‘morally wrong’ HMO rules – LandlordZONE
‘Despicable fraudster’ conned landlords out of tens of thousands – Landlord Today
Norwich planning landlord licences in standards drive – Eastern Daily Press
