Name: Ying Tan
Company: The Buy-To-Let Business

This data conflicts with our experience as a specialist buy-to-let broker. Before the credit crunch, lenders such as Mortgage Express, Capital Home Loans and Paragon were the largest lenders in the buy-to-let sector. These lenders still have a large back book, and the majority of these landlords are on SVR, which is 1.75% over base in some instances.

This equates to a pay rate of 2.25%, so that on average, an interest-only mortgage of £120,000 has payments of £225 a month. A typical property like this should be getting a rental of £600 to £700, thus clearing a healthy profit.

While rentals have contracted, they have not fallen at the same rate as Bank base rate. Many landlords are experiencing good cashflow at the moment. Clients are encouraged to use this additional cashflow to reduce capital, as many will be on high LTVs due to price falls.

The exception is where inexperienced landlords are locked into long-term fixes at high rates. In addition, owners of newbuild city centre apartments, struggling to rent their properties, will find it difficult to meet their commitments.

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A 1% rate rise could increase payments by 50%. This will have an immediate effect and could well create a shortfall if rates rise further. Landlords should look to fix their mortgage to mitigate their exposure to interest rate rises. They should also ensure that their property is in good order and that they are looking for tenants. Following this advice will keep rental voids to a minimum and allow the property to continue to yield good income.

Name: Kevin Still
Company: Atlantic Financial Management

A recent survey by market research agency, BDRC Continental of 500 private landlords revealed that while optimism has returned to the rental sector, arrears have reached their highest level since 2006.

Inevitably, this puts pressure on landlords to cover their mortgage and other property costs. The threat of interest rate rises will certainly be a worry for those landlords who are only just making ends meet.

Our own research indicates that loss of income was the greatest reason for clients approaching us for help in the last six months. So a shortfall in rent payments, combined with an increase in costs, could certainly be a good reason for some buyto-let landlords to look for alternatives to ensure that their property – and long-term source of income – is not put at risk.

One option could be to look at debt management as a solution to help them manage their finances. Mortgage payments are treated as a priority in a debt management plan, along with council tax, utilities and critical insurance.

Indeed, at Atlantic, one of our priorities is to protect a client’s home and ensure that a realistic repayment arrangement is negotiated to clear mortgage arrears as part of a holistic debt solution.

With the prospects of increased financial pressure in the coming months and years, we think it makes sense for landlords to work with debt advisers to find the right solution, rather than finding themselves faced with repossession proceedings from their lender.

Name: Ian Andrew
Company: The Mortgage Works

Despite recent media reports that the buy-to-let market has seen a resurgence, some landlords are finding it difficult. There are a number of things that they can do to mitigate the risk posed by future increases in their mortgage repayments.

One immediate solution is to consider increasing the rent they charge on their existing portfolio, which is something that some landlords have already done. LSL Property Services recently reported that rents have risen for five successive months and are 3.2% higher than a year ago – an average increase of £23 per month.

Landlords should try to capitalise on any shortfall in the availability of rented housing in the location where they have property. Renting is becoming an increasingly popular option as people struggle to find the deposit needed, or as homeowners consider moving from their current home, as renting might be cheaper than a mortgage.

Depending on their borrowing arrangements, landlords should consider shopping around for mortgage products that let them hedge against future increases in interest rates. Fixed rate deals and products such as tracker mortgages where the interest rate reduces on an annual basis, might be options.

Finally, a longer-term option is to put money into a ‘slush fund’ to enable landlords to cover any unexpected costs should they be faced with a void period or increases in their mortgage payments. This is common sense, and is adopted by many professional landlords.