Mortgage Payment Deferrals Offer a Lifeline to Landlords06/08/2020
Insights from Q2 of our Landlords Panel report
In March, the Treasury acted to offer Buy To Let (BTL) landlords the opportunity to apply for a repayment deferral, often referred to as ‘payment holiday’ on any of their mortgage products. In the Q2 wave of our Landlords Panel research programme, we interviewed almost 800 members of the National Residential Landlords Association with BTL borrowing to assess take-up of this initiative and the drivers for doing so. Before we look at the findings in detail, here are a few facts and figures derived from our latest research:
- 6 in 10 landlords have at least one BTL mortgage across their portfolio, the rest are unencumbered (lucky them!)
- The vast majority of BTL mortgages are ‘interest only’ rather than repayment products
- Most borrowers owe money on each of their properties (some are in a mixed situation)
- A typical borrower has 4.8 individual BTL loans, held with 2.4 different lenders
- On average a BTL landlord owes £682k and repaid almost £20k in mortgage interest last year
We asked our sample whether or not they had engaged with the mortgage repayment deferral scheme, and found the following:
9% of borrowers have applied for and received a BTL mortgage ‘payment holiday’ with the incidence peaking among the smallest, single property landlords (18%) for whom the financial stress of maintaining their property during the pandemic has been most acute. Elsewhere, 4% reported that whilst they hadn’t yet applied, they were considering doing so in the future (the scheme has recently been extended to the end of October), again the smallest investors being most likely to apply.
Over 8 in 10 of those offered a BTL payment deferral requested a 3 month break, with the remainder opting for 2 months (8%) or a longer period of 4+ months (9%).
The most common reasons for BTL landlords requesting a payment deferral was to help offset a fall in rental income (often caused by tenants themselves taking advantage of a rental payment ‘holiday’) and to fundamentally protect their business throughout the pandemic.
Elsewhere, the money saved on mortgage interest payments enabled landlords to pass savings on to tenants, and to build up their cash reserves. One in five applicants had suffered a reduction in their own personal income through a change in employment circumstance (the vast majority of BTL landlords have a ‘day job’).
Successful applicants were generally complimentary of lenders processes, although some noted differences in the experience where they had applied to multiple lenders.
- 61% were reassured that there would be no impact on their credit file as a result of taking a deferral
- 50% felt the terms of the payment deferral were reasonable
- 31% reported that without a payment deferral, they would have struggled to continue as a landlord
We’ll be checking in again through our Q3 survey wave next month to see how BTL landlords are managing as the first tranche of deferrals come to an end.
Please talk to us if you’d like to know more about landlords' attitudes and coping strategies during these turbulent times.