First time buyers will feel the pinch of interest rate hikes in the coming months but buy-to-let investors will continue to make their mortgage repayments says research conducted by the RICS.
With affordability at the worst levels since 1992, first time buyers will slip behind in their mortgage repayments to a greater extent than buy-to-let investors who are less at risk. Buy-to-let investors tend to be older - with over half of all investors aged over forty five - and have larger disposable incomes (and possibly greater access to equity release) compared to first time buyers who have pushed themselves to the limit to get onto the housing market. Of the 11,650,000 mortgages in the UK, 0.96 percent of them were in arrears amounting to 111,860. But only 6.6 percent of all mortgages were buy-to-let and only 0.69 percent of these mortgages were in arrears, a mere 5,318 mortgages.
RICS expects that buy-to-let investors will have no difficulty finding tenants at suitable rental rates in the coming quarters as rental demand remains strong in a growing economy. Employment conditions remain firm and rising house prices could force would-be-buyers to rent. Data from the RICS lettings survey shows that rents are rising at close to the fastest pace in five years, and tenant demand remains buoyant.
RICS economist David Stubbs, said:
“Buy-to-let investors will be less at risk from repossessions in the coming months. Older, wiser investors are likely to ride out periods of interest rate rises looking to the benefits of long term capital growth rather than short term rental income.
“January's surprise interest rate rise is likely to soften new buyer enquiries in the coming months but those buyers who have already taken the housing market plunge could find mortgage companies knocking at their doors in the near future as affordability conditions bite.”
