The Charlbury Group says it is finding growing evidence of a hidden BTL sector which could mean that tens of thousands of properties with a residential mortgage loan are being rented out.
It says this may mean many more repossessions are on the way. During the mortgage peak, BTL loans had a lower LTV than residential loans so Charlbury predicts that anyone using a residential loan for renting is likely to be even closer to negative equity than other landlords.
Last week, the Council of Mortgage Lenders revealed that 26,800 buy-to-let mortgages were over three months in arrears while a further 2,700 were over three months in arrears with a receiver of rent in place. It also warned of a hidden buy-to-let sector.
The CML says: “The position of tenants is a matter of concern but this is not primarily a buy-to-let problem, it is a greater problem, where the landlord has taken out the mortgage as a homeowner but failed to seek permission from the lender to let out the property.”
Charlbury director Richard Hirst says that if tenants are in a residential property, it will create significant delay and complication with the management of the repossessed account.
He says: “This tangled web could stretch out the repossession process. If it is the case that this is a widespread situation, then the mortgage market will have an entirely new challenge to face.”