The buy-to-let sector and renters have been hit the hardest by rising interest rates and the lingering effects of the “mini” Budget, MPs have been told.
During a session on the state of the mortgage market yesterday afternoon (November 3), members of the Treasury committee heard from industry experts about how the market operates and what supports are in place for vulnerable customers following recent turmoil.
Nationwide’s chief financial officer, Chris Rhodes told MPs that the buy-to-let sector has felt the biggest impact from September’s “mini” Budget, which sent gilt yields soaring and resulted in mortgage products being pulled from the market.
Joining Rhodes was John Charcol’s senior mortgage technical manager, Ray Boulger who agreed that buy-to-let faced the most pressure.
“The point about buy-to-let is worth making because pretty much all buy-to-let mortgages are on interest only,” Boulger told the committee.
This means that landlords with mortgages on their property, who may be coming off a 2 per cent fixed rate and are now looking at a 6 per cent rate, could see their repayment increase by over 200 per cent.
“The buy-to-let market is where we are likely to see a lot more stress than in the residential market.
“Stress rates and interest rates mean it is marginally profitable, if not loss making, to take on new property,” he said.
Boulger added that these factors mean there are implications for the sustainability of the market in the short to medium term.
Joining Rhodes and Boulger at the session was Joanna Elson, chief executive of debt charity and helpline, the Money Advice Trust.
Elson said the Money Advice Trust’s helpline has seen a 37 per cent increase in the number of calls compared to the same time last year from people worried about the cost-of-living.
She pointed out that renters will likely bear the brunt of the impact from the stress on the buy-to-let sector.
Elson also pointed out that it is the most vulnerable groups that will, and already are feeling the worst impact.
“Those with the lowest incomes have the least flex, we are definitely picking this up,” Elson told the committee.
In August the Trust sought to find out what percentage of callers were in mortgage arrears, the figure was 5 per cent - up from 2 per cent in March.
"When we look at different groups that figure changes.
"For people from ethnic minorities that’s 7 per cent rather than 5 per cent. For people receiving means tested benefits that’s 10 per cent. Young people under 34, that’s 11 per cent.
"So I think that gives us some clues on where we need to focus help,” Elson said, adding that the Trust and other charities are continuing to call on the government to increase benefits.
Typical mortgage increased by £220
The committee also heard how the ‘average’ UK mortgage repayment has now increased by £220 a month.
This is based on Nationwide figures of a standard fixed-rate mortgage of £240,000 over 20 years.
