A law firm has called for the advertising and promotion of buy-to-let mortgages to carry the same risk warnings as other forms of investment.
Moore Blatch says it is concerned that investors may seek legal redress if they were not advised that the BTL transaction is liable to fluctuations in returns. It also warns that, while the mortgage does not constitute an investment, the broker and lender must be aware of the purpose of the mortgage and the investment property on which it is secured.
Moore Blatch says that with falling rental yields and certain properties and locations suffering particularly badly, some investors may seek legal redress if they believe that they were not fully informed of the dangers of the transaction.
Head of lender services Paul Walshe says: “Forty one per cent of investors own buy-to-let portfolios containing only one or two properties and, set against a background of a 64 per cent increase in house prices over the last five years, many will have seen buy-to-let as a guaranteed investment.
“However, rental yields have fallen and may now not be covering mortgage payments coupled with the danger that, in the current market, they may see capital erosion.”