Buy to Let Property in Negative Equity

by Mark Johnston

The National Housing Federation (NHF) have published new forecasts that suggest that buy to let landlords who invested in property in the residential letting market at the peak in 2007 may be trapped by negative equity until at least 2014The housing federation’s report suggests that it will take at least four years for the UK housing market to recover to prices seen three years ago in 2007. This could mean that landlords who both in their period may have to wait seven years to recover their original investment.

Although this may seem worrying, many landlords have purchased their property for the rental income and would not be affected by this news unless they came to sell their investment.

Oxford Economics published an unrelated report which suggested that UK house prices will grow by 22% over the next 5 to 6 years. Mortgagerates.org.uk report on house prices frequently and are seeing a wide range of views. Readers should check back to get the most up to date news on the UK mortgage and property market.

The Oxford Economics report is expecting prices to grow by up to 7.5% by the end of 2010 but then predict a market decline next year where they expect UK house prices to contract by 3%. Growth is expected the following year in 2012 by around 1% followed by a strong recovery in 2012 where prices are expected to increase by around 4% over the annum. The report outlines further rises of 5.4% in 2014 and sustained growth in 2015 of nearly 5%.

The National Housing Federation (NHF) still point out that the drop property prices has not improved affordability as problems getting mortgages and lenders only offering to lend smaller amounts has had a net effect with the majority of British people still renting their homes.

There is some good news for buy to let landlords though. The Mortgage Works has launched a new buy to let mortgage with a 75 percent loan to value (LTV) which is a lot more than many other lenders are offering. They have also made a considerable number of changes to their mortgage range which may improve things for buy to let customers.

As well as launching the new 75 percent mortgage they ahev also reduced some of their fixed rate buy to let mortgages by up to 0.6% and has scrapped fees for its two, three and five year mortgages.

Director of mortgages Andy McQueen says: “Added to the enhancements we made on September 1, these new changes will further strengthen our product offering in the buy-to-let, residential prime and guarantor markets. 

“By making these changes, we believe we are offering the increased clarity, variety and flexibility needed to ensure that intermediaries can satisfy the ever changing needs of their clients.”

They have also introduced a 4.99 percent lifetime variable rate mortgage that is the Bank of England base rate plus 2.49%, currently making it 2.99%.



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