Indeed, a recent online survey conducted on behalf of Axa by YouGov revealed 13 per cent of tenants had gone into arrears in the last 12 months, undermining the ability of investments to ‘self-finance’ through rental income streams.
In addition, those landlords coming to the end of fixed rate mortgage deals are being hit by higher rates and tougher mortgage criteria. So investment decisions, which were reliant upon stable interest rates, a buoyant rental market and appreciating property values, are suddenly called into question.
Clients coming off fixed rate deals may find they are being moved to a significantly higher rate, potentially increasing the payment per property by hundreds of pounds a month.
As such, clients may be looking to move lenders, but in the current economic climate, good deals are harder to come by. With the fall in house prices, a mortgage taken out a year ago at 85% of the property’s value may now represent 100% of the property’s value.
At the same time, many lenders have reduced the buy-to-let ‘loan to value’ cap (the maximum percentage of the property value they will lend), making it difficult to find alternative deals in an increasingly risk averse environment.
But whilst the buy-to-let market in undeniably tough, there are a number of debt solutions that go much further than just switching mortgage lenders, which can help clients to access the best advice and interest rates available for their specific circumstances and attitude to risk.
What this means is that mortgage holders who may, for example, be tempted to take the available equity in a bid to avoid further losses, should first take the opportunity to explore alternative routes to managing their debt.
Solutions that can often prove highly cost effective include negotiating with the current lender, looking elsewhere or where you have a property portfolio, moving debt across properties so as to reduce the ‘loan to value’ on the buy-to-let property thereby giving access to better mortgage deals.
Moving debt might involve borrowing on either a client’s personal property or another in their portfolio. Whatever an individual’s situation, it is important that mortgage holders take informed and impartial advice before acting to ensure they are not selling up too hastily or getting tied into a deal that is not right for them.
With the current climate requiring a steady nerve and informed decision making, buy-to-let investors should know that help is out there to assist them by assessing their overall debt, taking an in-depth look at the mortgage market and talking to the existing lender, which collectively can provide a set of recommendations that best manages their debt through these difficult times.
Oval can undertake a full property portfolio analysis and report on a fee or commission basis, which will clearly set out recommendations without further obligation on the part of the client.