Up to 40% of buy-to-let mortgage holders could sink into negative equity

Buy-to-let landlords have been warned that between 20 and 40 per cent of them are likely to fall into negative equity if house prices continue to fall at the current rate.

According to credit ratings agency Standard and Poor's, buy-to-let mortgages had a repossession rate greater than ordinary home loans in June.

Kate Livesey, a Standard and Poor's analyst said: "In a downturn we believe that the current stock of buy-to-let loans will carry higher credit risk than the stock of loans to prime owner-occupiers."

There are currently 1.1 million buy-to-let mortgages in the UK which makes up 11 per cent of the total number of home loans.

Despite this Standard and Poor's prediction, market research firm BDRC revealed in a survey that the number of landlords who feel optimistic about their future in the market has risen by four per cent since last year.

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