Growing number of new landlords putting strain on buy-to-let mortgage sector

Posted under General by Jermaine

As increasing number of homeowners are opting to rent their homes, with the result that the buy-to-let mortgage sector is likely to struggle even more.

Failing to meet the rising demand, two of the sector’s largest lenders, Bradford and Bingley along with Paragon, have refrained from doing new business in the recent months. This has added to shortage in mortgage lending.

The financial comparison site Moneysupermarket.com reports that buy-to-let mortgage lenders are funding only those borrowers whose credit records are excellent and whose amount of equity in homes is significant. It points out that the number of offers on buy-to-let mortgage has gone down to just 300 from more than 4,300 in the previous year.

David Hollingworth of London and Country, who lends free advice on mortgage, has a word of caution for homeowners who aspire to become amateur landlords. He explains that under the circumstances when the credit is highly expensive and difficult to obtain, homeowners would be simply increasing the level of their debt to an amount higher than initially planned.

He advises that borrowers must understand the risks involved in being a landlord. They will have to make larger payments irrespective of tenants being in place or not.

Thousand of investors who bought properties a few years ago are unable to get enough rental income to pay mortgages. Their hopes of value appreciation of their properties were dashed by the collapse in the market. The number of defaulters on mortgages has gone up in the past few months amidst predictions of the market getting worse in second half of the current year.