Negative Equity Fears for Landlords
November 18, 2008 by Brendan
News
Ratings agency Standard & Poor’s Ratings Services have estimated that between 20 and 40 percent of landlords could be in negative equity next year so will owe more on their property than it is worth if the prices of property fall by 25 to 30 percent as experts predict.
Similar figures for homeowners are predicted at 14 to 20 percent.
Part of the larger problem with landlords is that they are likely to have interest only mortgages anyway, which means they are more vulnerable to price falls because they have not been paying off the capital.
According to S&P, 88 percent of buy to let mortgages are on an interest only basis and almost half of those mortgages they looked at had a Loan to Value (LTV) of 80 percent or more.
Buy to let mortgages account for 11 percent of the whole market, consisting of around 1.1 million mortgages and already show a higher than normal level of repossessions than their residential counterparts.
Written by
Brendan
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