Tuesday, May 10, 2011
BTL bananna skins
Even mild declines in house prices over the next two years could place over 30% of buy-to-let borrowers in negative equity, Standard & Poorâ€™s has warned. A report by the credit agency says if house prices fell by 5% in 2011 and a further 5% in 2012, 30% of buy-to-let loan balances would be in negative equity, compared to 17% for owner-occupier loans, which it says would reduce buy-to-let borrowersâ€™ financial flexibility and therefore risk a rise in arrears. Standard & Poorâ€™s puts the difference between the two sectors down to the higher average LTV ratio among buy-to-let loans in the sample it used and the fact that buy-to-let LTV ratios are concentrated in a relatively narrow range.