A new study has found only a third of buy-to-let mortgage borrowers manage to pay off the lump sum due once the loan matures. The research, by credit
A new study has found only a third of buy-to-let mortgage borrowers manage to pay off the lump sum due once the loan matures.
The research, by credit ratings giant S&P, examined £15.2bn worth of loans in 84 residential mortgage-backed securities.
It found 36 per cent of loans due to mature between January 2016 and June this year failed to pay off the capital lump sum required at the end of the mortgage.
Some 27.5 per cent were owner-occupiers, while 8.5 per cent were buy to let mortgage borrowers.
S&P said because of house price increases since the loans were taken out, those in the South East at least had the option of moving to a smaller home and paying off their loans with the cash left over. However, as house price growth in the North West, Northern Ireland and Scotland has been relatively subdued, those homeowners do not have the same option.
The good news, though, is that S&P found there was “limited appetite to commence repossession proceedings against borrowers who have been paying interest on time but fail to pay the lump sum of the capital”.
Lenders are likely to treat those people on a “case by case basis”.
“It is possible that some loans may only be repaid upon the death of the borrower,” it added.
Interest rate worries
In recent months mortgage borrowers have expressed concerns about rising interest rates, although economists have suggested any rate rises will be gradual, after the Bank of England‘s policymakers hiked rates for the first time in almost a decade last month.
Official figures published in September showed mortgage borrowing had hit a record level, rising to almost its highest since April 2008.