Buy-To-Let Homes in Arrears

Why have recent reports been showing an increase in the number of mortgages being in arrears? More specifically the interest-only mortgages? And furthermore specifically, those on buy-to-let homes?

Interest only mortgages are typically mortgages that are seen to be taken by investors searching for a more affordable option to the standard mortgage scheme.

So, why has it been found that those who hold interest-only mortgages are more likely to be in arrears today?

In a recent study by the Central Bank, it was found that this is the case for investors on an interest-only mortgage deal for buy-to-let homes.

The surplus in interest-only mortgages that we are seeing today was initiated by buyers of high end and expensive properties during the last housing boom.

It is predicted now, that we will see a strong increase in the amount of homeowner to go into arrears as nearly a third of the interest-only mortgages have plans to make the switch to paying a traditional capital and interest mortgage from present 2018 to 2022.

It is not of a coincidence that we see the correlation of those in arrears from those in buy-to-let homes.

This is because in the past the interest-only mortgages were specifically offered to buyers of this kind.

It was even found that in 2008, prior to the boom, around 40 percent of the buy-to-let homes accounted for were financed by interest-only mortgages.

Since 2015, the central bank has found a dramatic cut back in the percentage of buy to let homes, however.

Now, nearly only 1 percent of buy to let homes are financed by interest-only mortgages.

From this, that 1 percent had a high tendency and likelihood to also be in arrears.

The reason for this steep percentage of interest only mortgages to be in arrears is likely due to the investors hopes that they would be able to sell the home for a higher price, making a steep profit, once the interest-only period had ended.

The investors that did enter their mortgage commitments with these preconceived notions faced a steep loss with the collapse of the market, however.

They found themselves suffering a huge debt and an inability to resell, leaving them in arrears and with the homes they had no intentions of keeping.

It is predicted we will continue seeing this trend as buy-to-let homeowners continue to make the switch from an interest-only mortgage to a more traditional mortgage.

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