The Council of Mortgage Lenders (CML)today published quarterly data and analysis on buy to let mortgage arrears and repossessions for the first time, having previously published data twice a year.
The Council of Mortgage Lenders reports that 1.44% of mortgages were at least three months in arrears as at the end of September 2008.
*This was up from 1.33% at the end of June. The number of cases in arrears at the end of September was 168,000, 8% higher than the 155,600 at the end of June.
Due to the credit crunch the number of households in arrears by the end of the year is likely to exceed the previous forecast of 170,000.
The report also states that 0.1% of all mortgaged properties were repossessed in the third quarter of 2008, up slightly from 0.09% in the second quarter to 11,300.
This is 12% higher than the 10,100 in the second quarter.
The CML expects the total number of repossessions by the end of 2008 to be around 45,000.
Buy-to-let mortgages have in the past shown better performance than the overall mortgage market in terms of payment defaults.
But in the third quarter the payment defaults of buy-to-let landlords has worsened more rapidly than the rest of the mortgage market.
This is probably due to falling rents and an over-supply of rental property in some localities, resulting in many landlords being unable to let their property or achieve high enough rents to support their borrowing commitments leaving them with a mortgage shortfall. with the housing market stagnant, it is becoming more difficult to sell.
At the end of September 2008, 1.58% of buy-to-let loans were in arrears (up by nearly .5% from 1.10% at the end of June), compared with 1.44% of all mortgages.
The number of buy-to-let mortgages taken into possession in the third quarter in the UK was 900, the same as in the first and second quarters of the year, representing 0.08% of all buy-to-let mortgages (compared with 0.1% across the mortgage market as a whole).
A number of factors will affect the number of buy-to-let mortgage repossessions, including the extent to which buy-to-let mortgage lenders appoint ‘receivers of rent’ as an alternative to repossession.
Mortgage lenders may prefer this route in many cases where the buy to let tenants are paying their rent however the landlord is not paying the mortgage.
Landlords can protect themselves and purchase rent guarantee insurance from UK landlord buy to let insurance comparison site http://www.landlord-insurance.net.