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Private UK property landlords reveal fears over interest rate rises

The latest report from BDRC Continental’s Landlords Panel reveals that many private landlords fear the impact of a potential rise in buy to let (BTL) mortgage interest rates. Almost three quarters of private landlords, 73%, have at least one mortgage on their rental property and almost half, 47%, have at least five BTL mortgages held against their portfolio.

The survey found that 31% of private landlords agree or strongly agree that they are worried about their ability to repay should BTL mortgage rates begin to rise.
The research also reveals that BTL mortgage interest rate rises will present a financial challenge to many private landlords. Faced with two possible interest rate rise scenarios, few landlords feel they would be insulated from the impact. While a 1% increase would have a significant negative impact for 29% of private landlords with BTL mortgages, a 2% rise would create a ‘significant impact’ for 53% of mortgaged respondents, including a projected 8% being forced to re-evaluate their future as a landlord, and 6% having to reduce the size of their portfolio or leave the private rental sector completely.

The research shows one in seven private landlords have taken out a BTL loan in the last year,  one third to fund the purchase of another BTL property, one third to get a lower interest rate and the remaining third for other reasons, such as to move from a residential to a BTL loan, obtain a fixed rate, or to fund development.

Just under one half, 49%, of the landlords strongly agree that the market would benefit from more BTL lenders and greater competition, although the good news for providers is that 59% agree or strongly agree that they are satisfied with their current lender and 54% say they are open to the idea of BTL lenders providing broader advice to them as a landlord. For 44% their choice of BTL lender was determined by the lowest interest rate, while 40% based their choice of lender on advice from an intermediary.

‘Year on year, private landlords are increasingly optimistic about the private rental sector, with 54% rating the prospects as good or very good. As a backdrop to landlords fears over interest rates, predicted tenant demand has improved on the first quarter of 2011, with a net increase of 8%. However, fears over potential interest rate rises are very real,’ said Mark Long, business propositions director for BDRC Continental.