buy to let investors
Buy-to-let mortgage arrears have not yet surged as a result of the increasing number of severe tenant arrears cases. This gives the impression that the landlord is still meeting the mortgage payments even if the rent has not been paid by the tenant. In the last three months of 2011, the number of buy-to-let mortgages that were more than three months in arrears fell by 5% compared to the previous quarter, representing an annual decline of 22%. However there are still more than three times as many buy-to-let mortgages in severe arrears than in Q4 2007.
Low mortgage rates have been a godsend for private landlords, and have helped prevent mortgage arrears from spiraling in spite of the increased number of tenants facing severe arrears. Not only have private landlords kept down the monthly payments they face, but low interest rates, compared to high rents, have also allowed many investors to set aside slush funds, and/or pay for rental guarantee schemes to guard against potential mortgage arrears.
Non-payment of rent is a landlord’s worst nightmare. A tenant in severe arrears means not only that the landlord doesn’t receive the rental income needed to pay the mortgage, and they are unable to fill the property as they would with a void period, because the property is already occupied.
As a result, in the current economic climate, there is an even greater need to rigorously scrutinise a prospective tenant’s financial circumstances at the start of any tenancy. In many cases, landlords are willing to negotiate on the rent to accept the tenant with the best financial credentials.