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Buy To Let Property Investors Planning To Exit Market

New research has suggested that over a quarter of UK buy to let property investors are planning to exit the private rental sector this year.

The survey of 800 landlords, carried out by landlord insurance provider Simply Business, revealed that with uncertain market conditions, fourth fifths (82 per cent) of landlords are not planning on buying any more properties in 2020. Just one tenth (13 per cent) said they would buy another property this year, while a third (35 per cent) also reported a decrease in their rental yield in 2019.

The top reasons buy to let property investors gave for wanting to sell are tax increases and government reform, such as shifting House in Multiple Occupation (HMO) licensing, which added new stipulations on the minimum size of rooms, as well as banning of admin fees. Well over a tenth cited these as their reasons.

Other reasons that buy to let property investors gave for planning to sell include rising rental costs (10 per cent), cashing in on their investment (9 per cent), economic instability (5 per cent) and slowing house price growth (4 per cent). This comes after a third (35 per cent) also reported a decrease in their rental yield in 2019, which adds to the desire to sell.

A fifth (20 per cent) reported a decrease of 0-5 per cent, just under one in 10 (9 per cent) reported a decrease of 5-10 per cent and 3 per cent of buy to let property investors reported a decrease of 10-15 per cent.

Looking ahead to this year, over a quarter (27 per cent) of landlords expect to see a further decrease in their rental yield in 2020. One in five (18 per cent) expect to see a decrease of 0-5 per cent, and a further 6 per cent of landlords expect to see a decrease of 5-10 per cent. Only 2 per cent of landlords expect to see a decrease of 10-15 per cent. However, over half (52 per cent) are still optimistic and expect their rental yield to increase in 2020.

Bea Montoya, Chief Operating Officer at Simply Business commented: ‘Landlords around the country are telling us that government reforms, tax increases, and rising rental costs are forcing them to put their investments up for sale. The tax increases imposed by the government are proving counter-productive for landlords, while ongoing political and economic uncertainty hasn’t been providing landlords with the confidence they need to stay in the market. But selling a buy to let is a big decision, especially if you’re selling more than one.

‘Any landlord looking to sell up should make sure they understand the complexities surrounding buy to let sales, particularly if the property is occupied. Any tenants should be made aware of plans to sell as early as possible and given reassurance their tenancy still stands. When it comes to selling, landlords need to understand any tax implications involved, such as capital gains tax. If the property is sold for more than it was paid for, there will be a capital gains tax liability.’

Source: Residential Landlord

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Buy-to-let alert! The best (and worst) locations for rent changes in 2019

It’s been another tough year for buy-to-let investors in 2019.

On top of swallowing more punitive changes from HM Revenue and Customs, like an additional reduction in mortgage interest relief, landlords have also had to suffer the Tenant Fees Act of June, a new law which has seen letting agents pass some of the admin fees traditionally footed by the tenant onto the property owner instead.

On the up

One silver lining for investors, however, is that the impact of these measures, in thinning landlord numbers, has worsened the supply crunch and thus forced rents higher. Data from Howsy shows that the average rent in England has risen 0.9% in the last 12 months, with rents rising most significantly in Yorkshire and the Humber (up 5.1%).

In 2019 average rents increased in eight out of nine major English regions, the property lettings platform says, with rental costs dropping only in the North East (down 1.1%).

Annual Rent Increase by Region

LocationChange in rent (2018–2019)
Yorkshire and the Humber5.10%
West Midlands3.00%
North West2.60%
South West2.50%
East Midlands1.90%
South East1.40%
East of England1.20%
North East-1.10%

Too much cost!

And some of the rent rises on a more local level have been quite blistering. In Exeter these have exploded by 28.7% on an average basis from 2018 levels, putting the Devon town at the top of the tree. Another nine locations saw rents rise by double-digit percentages.

It’s critical to stress, however, that conditions haven’t been sunny for all of England’s landlords. In the Northamptonshire town of Corby, for example, buy-to-let investors have seen the average rent plummet 10.5% over the past year, while those in Elmbridge in Surrey have also seen rents drop by more than 10%.

Even if you let out a property in one of those locations where rents are soaring skywards, I still don’t consider buy-to-let to be an attractive destination for your hard-earned cash. On a national basis, it’s quite possible that the 0.9% average rent rise in 2019 wasn’t enough to cover the increased tax, administrative, and running costs that many landlords have faced. And things threaten to get even tougher in 2020 as a raft of new changes come into force.

A better way to play property

In my opinion, a much better way to get rich from the UK property market is through share investing. Of course investors need to be careful – those investing in firms with high exposure to the physical retail sector are dicing with danger right now – though there’s a multitude of other ways to get rich from bricks and mortar.

One great way to get rich over the next decade, I believe, is to get some exposure to e-commerce. Even though broader retail conditions remain difficult right now, the amount of business being conducted by online sellers continues to thrive. Royal Mail said in its latest trading statement that parcel volumes were up a chunky 5% in the six months to September.

And so I think a good idea is to buy into firms that own logistics and distribution hubs that are integral to the business of internet retailing, like Tritax Big Box REIT and Urban Logistics REIT. The latter looks particularly attractive, too, as not only do City analysts expect earnings to swell by double-digit percentages over the next couple of years at least but current dividend projections leave it with mighty yields above 5% over the medium term. So forget about buy to let and put your hard-earned cash to work here instead, I say.

By Royston Wild

Source: Yahoo Finance UK

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Buy To Let Property Sector Reacts To Conservative Election Victory

The landslide election victory by the Conservative party has met with positive reactions from figures in the buy to let property investment sector.

Founder and Managing Director of Sourced Capital, Stephen Moss, commented: ‘As the markets bounce around and then settle in the wake of the Conservative landslide, investor thoughts will be buoyed.

‘We’ve seen property stocks bounce up to 10 per cent this morning on the election news and this will cement a ‘property is safe as houses’ viewpoint which will stand the market in good stead going forward, both from an investment and residential point of view.’

Dilpreet Bhagrath, Mortgage Expert at online mortgage broker Trussle commented: ‘Political uncertainty has gripped the housing market for the past three years with many holding off buying and selling, and as a result, there’s been a recent fall in mortgage lending. The reassurance that comes with a five-year administration may encourage those prospective and current homeowners who had previously adopted a ‘wait and see’ approach. We’re hopeful that we’ll see activity in the housing market increase.’

Damien Siviter, Group Managing Director of SevenCapital, said: ‘Should Boris stay true to his plans for Brexit, the 3.5 years of being stuck in a limbo could finally have an outcome, which is a resounding wish amongst both business and the general public.

‘However, despite the uncertainty of the past few years, the UK has proven its ability to maintain its position as a top Global economic and financial centre and attractive, investable region. With Boris now able to move forward with his plans for Brexit, businesses should hopefully be able to begin to see some clarity over the next few years on how the UK will exit the EU, allowing those markets that have faltered to start to move again.’

However, some wanted to see further support for the buy to let sector following the Tory victory.

Bea Montoya, Chief Operating Officer at Simply Business, commented: ‘Buy to let landlords contribute a combined £16.1bn to the economy through pre-tax spending, and it’s vital that Boris Johnson and his party recognise their importance to Britain.

‘A lifetime deposit would bring about huge change, but with little detail published, it’s hard to see how this will work in practice, or the impact it could have on landlords.

‘We know a quarter of landlords already plan to cash in next year due to government reform, tax hikes, and uncertainty in the market. The current tax increases imposed by the government are proving counterproductive, but with no promises to prevent those looking to sell from leaving, we could see half a million homes put up for sale next year alone.’

Source: Residential Landlord

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Buy To Let Tenants Splash Out On Christmas Decorations

Tenants in the buy to let private rental sector splash out over £1 billion on Christmas decorations every year, equating to £77.90 per tenant on average.

Research carried out by HomeLet found that the majority of those surveyed (62 per cent) believe the festive season officially kick starts on the 29th of November. However, some super keen residents have already had their Christmas decorations up for over a month, as it’s revealed 2.2 per cent of respondents start decorating their house as early as October.

Though it appears that there’s still some Brits who like to do things a little last minute as 1 per cent admitted to usually starting their decorating on Christmas Eve.  

It’s no surprise that millennials maintain their reputation for splashing their cash, with 25-34-year olds spending the most on Christmas decorations, averaging £113.07 a year. In contrast, 55-64-year olds are perhaps the most economical with annual additions to their decorations, spending the least of all age demographics, averaging £52.97 each year to top up their collection of Christmas decorations.

The study also found that artificial Christmas trees are the staple of a British Christmas, with 62 per cent choosing these to decorate their homes. In comparison, less than a fifth of Brits (18 per cent) continue with the traditional real Christmas tree.

Despite the Christmas tree usually being the focal point for families on Christmas day, a fifth of tenants revealed they don’t even bother with one. Though the biggest spenders, residents of Bristol and Nottingham appear to be the most anti-tree, with over a half admitting to not including a tree as part of their Christmas decorations.

Biggest Spenders on Christmas Decorations by City

o          Bristol – £139.10

o          Nottingham – £118.98

o          Glasgow – £114.85

o          Norwich – £112.86

o          Leeds – £89.96

o          Liverpool – £80.51

o          London – £75.79

o          Edinburgh -£72.79

o          Cardiff – £67.62

o          Birmingham – £53.29

o          Belfast – £52.75

o          Southampton – £51.75

o          Manchester – £51.73

o          Newcastle – £51.60

o          Sheffield – £21.07

Although the vast majority of us do opt to dust off our decorations each year and transform our homes, the research found that this can sometimes come at a cost. A third of tenants (34 per cent) revealed that they’ve damaged their property as a result of putting up Christmas decorations.

Most Common Damages

  • Scuffing walls when bringing in a Christmas tree (36 per cent)
  • Damaging paint work when taking down decorations (31 per cent)
  • Damage to windows (fake snow spray etc) (16 per cent)
  • Exterior wall damage (10 per cent)

Rob Wishart, Group Data Manager at HomeLet, commented on the findings: ‘With the countdown to Christmas well and truly underway, as a nation it shows how much we love the festive period, with many of us starting to decorate their homes before even opening the first door of their advent calendar (and some even as early as October!).

‘With so many of us eager to deck out our homes in festive décor, it’s important to take care when putting up your decorations to avoid any Christmas related mishaps. Ensuring that you fully prepare the space you’re about to decorate is vital, as significant amounts of clutter can cause damage to your surroundings, or worse, yourself!’

Source: Residential Landlord

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Oxford best city for buy-to-let investment

Aldermore has named Oxford the best city for buy-to-let investment in the UK.

The city emerged top of 25 analysed in the bank’s Buy to Let City Tracker, with Manchester, Edinburgh, London and Norwich making up the rest of the top five.

Oxford’s biggest selling point for private landlords was that it was one of the largest private sector rental markets in the UK, with 28 per cent of all residents renting privately.

The city’s average monthly rent for a room was £596, it has low levels of vacancy and average property prices have grown at 4.8 per cent a year over the past decade.

The tracker analysed five measures of buy-to-let investment desirability. They were average total rent, best short-term returns through yield, long-term return through house price growth over the past decade, lowest number of vacancies as a proportion of total housing stock, and percentage of population renting.

The five cities ranked lowest on the list were Derby, Sheffield, Bradford, Newcastle and Wolverhampton.

Strong down south
Regionally, the south of England appeared strongest overall, with good long-term investment prospects. Bristol averaged annual house price rises of 4.8 per cent over the ten-year period, the same as Oxford.

The Midlands was revealed to be a mixed market, with Nottingham showing impressive short-term yield of 7.3 per cent.

Yorkshire was less strong overall, with lower average prices per room and below average yields.

“The number of people renting in the UK has grown rapidly, by 1.7 million in 10 years, and private landlords are increasingly a central part of the housing market,” said Damian Thompson, director of mortgages at Aldermore.

“The housing market is made up of multiple small markets with their own conditions and challenges.

“Regulatory changes and persistent economic uncertainty have affected regions differently and landlords need backing and advice from lenders,” Thompson added.

Written by: Liz Bury

Source: Your Money

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Scotland Best For Buy To Let Rental Income

Rental income in relation to property cost is the normal basis for buy to let property investment, and this can vary hugely from area to area.

Lettings management platform, Howsy, has revealed the most appealing markets for UK landlords based on the annual rental income return available as a percentage of the property investment cost.

They looked at the average annual rent in every area of the UK and what it equates to as a percentage of the cost of a property to find the areas that provide a better than average rental come return as a proportion of overall house price.

Across the UK the current annual rent of £11,436 accounts for 4.9 per cent of the average UK house price (£234,370).

But where in the UK sits way above this national average?

Scotland seems to be the place to invest for landlords, with 18 out of the top 20 areas with the highest annual rental income as a proportion of house price located north of the border.

Glasgow tops the table with the annual rental income of £10,596 accounting for a huge 7.7 per cent of the average house price, closely followed by Inverclyde (7.1 per cent), Midlothian (6.9 per cent) and West Dunbartonshire (6.9 per cent).

Burnley is the highest outside of Scotland and across England at 6.5 per cent, with Belfast ranking 10th (6.2 per cent), while County Durham and Blackpool place 17th and 18th (5.7 per cent).

Founder and CEO of Howsy, Calum Brannan, commented: ‘There are a whole host of costs to account for when investing in a buy-to-let property but the most important is, of course, the rental income available.

‘However, high rental income doesn’t necessarily mean an area offers the best investment option and if it requires a high initial cost to buy the property, you could be recouping that investment for longer than you might in other areas with a lower rental income.

‘It’s about finding that balance and areas such as Glasgow not only offer a relatively affordable property cost to begin with, but the rental income available as a proportion of house price is far higher than anywhere else in the UK.’

Source: Residential Landlord

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Landlords facing tax increases

One of the biggest life events to provoke a conversation about protection is when people buy a house and take out a mortgage.

This has been a constant for a long time in the UK.

Residential mortgages are a big catalyst for people taking out some form of protection cover.

Sometimes though, advisers find it a bit more difficult to position the idea of protection to landlords because the protection need is not quite as obvious.

People who purchase properties which they intend to rent out typically use buy-to-let interest only mortgages.

Often, their long term expectation is that property prices will increase and they will eventually cash in by selling them.

In the meantime, the rental income will fund the monthly mortgage payments and will also provide them with additional income.

Many landlords see the value of a property portfolio as a crucial part of their retirement planning.

However, in 2017, we saw the implementation of some new tax rules that meant over the next four years, the amount of mortgage interest which could be offset from rental profit reduces.

In this current tax year (2019/2020), landlords can offset 25 per cent of their mortgage interest from their rental profit.

From April 2020, this reduces to zero.

There is a tax credit relief available based on basic rate tax, but landlords will have to pay income tax on all of the rental income they receive meaning that many of them will pay more tax.

This new tax rule is going to change the landscape of the buy-to-let market.

How it normally works

For example, let’s say a landlord has five properties in their buy-to-let portfolio.

The properties are worth about £700,000 in total, but there are 5 lots of £100,000 interest-only mortgages, a total of £500,000.

Let’s say the interest rate on each buy-to-let mortgage is 3 per cent.

The total interest-only mortgage payments each month would be £1,249 or £14,988 each year.

Let’s say the income received on each property is £600 each month – in total this is £3,000 each month or £36,000 a year.

Clearly we can see that despite the large amount of mortgage debt and mortgage payments that need to be paid; the rental income will fund these mortgage payments and still yield a generous profit to the landlord.

A private landlord would typically complete a tax return each year and on it they would detail the income from their property portfolio and then detail all of their expenditures such as management fees and repairs, along with other expenses including the mortgage interest.

Income tax on the rental income profit is then charged at the normal rate of income tax.

But as you can guess, from April 2020, many private landlords with buy-to-let mortgages will simply pay more income tax on their rental income.

What if interest rates go up?

We know that we have been experiencing record-low interest rates for the past decade but inevitably, at some point, they are going to go up.

With this same example, let’s say the interest charged on those buy-to-let properties goes up to 6 per cent. I would imagine most people reading this would have experienced paying something close to that rate at some point in the past.

In my example scenario, the mortgage interest payments would increase to £2,501 each month or £30,012 each year.

This scenario looks a lot less attractive for a landlord.

If they can not offset interest-only mortgage payments from their rental income profit; this will result in significantly lower returns and then they will inevitably have to consider alternative options.

How will landlords adapt?

Let’s say a landlord runs their property business through a company rather than as a private venture; would these new tax changes I mentioned above apply? The answer is no.

If a company owns the property portfolio then the tax which is paid on the profit of the business is corporation tax.

At the moment, the corporation tax rate is 19 per cent but this is going to drop to 17 per cent in the next tax year (2019/2020) making the idea of holding properties within a limited company or specifically a SPV (Special Purpose Vehicle) quite attractive.

This is because a lot less tax will need to be paid which means a much greater net profit.

I must caveat that any landlords who do decide to move their private property portfolio across to a SPV would need to take proper advice because there are lots of implications to consider including stamp duty, lending criteria for new mortgages and various other considerations.

That said, at face value, it feels like these tax changes will nudge many landlords to move across to this type of model going forward.

Partners in business

Let’s look at a scenario where landlords set up a business to hold their property portfolio.

What are the protection opportunities that could arise for situations where people work together on a property venture?

Let’s say three skilled tradesmen get together with the idea of setting up a rental business.

They set up an SPV and they each invest £50k of their own money to buy their first property from an auction.

They buy the property with the cash they have pooled together with the intention of renovating it and putting it on the rental market.

Bob is a builder, Eric is an electrician and Paul is a plumber.

They do all the necessary work themselves and when the property is complete, they put it on the rental market.

The value of the property has increased, so they mortgage it and using those funds, they return to the property auctions to find their second property.

Their plan is to carry on doing this and build up their property empire.

Opportunities for Protection conversations?

What are the immediate protection opportunities up for discussion?

Control – Each partner will have a shareholding in the business to the value of how much they invested, so there is a question of how they keep control of their business if one of them dies or gets sick.

How would the surviving business owners feel if someone came into the business that they did not want to work with, because they had inherited their deceased business partner’s shares?

What if this new person has no useful skills but wants a say in how the business is being run?

Would the surviving business partners like to have control of their own destiny?

The answer to fix this problem is simple business protection.

This could be life insurance or critical illness cover, which would provide the necessary funds to allow the remaining shareholders the ability to purchase the shares of the other shareholder who might have died or been diagnosed with a critical illness.

Part of this solution would include a legal agreement which is designed to protect both parties – the business but also the family of the deceased or sick director.

Key people? – A scenario like this also suggests that all three business owners are key people.

If they perform duties which are essential to the running of the business, then sickness or death of one of them could affect profitability.

The answer to this problem is simple protection cover for each key person.

This could be life cover, critical illness cover or income protection; all of which are designed to allow the business the funds to protect their profits and perhaps bring someone into the business to perform the duties of their sick or deceased business partner.

Debts? – Another problem is those mortgages.

Simple loan protection in the shape of life cover or critical illness cover could be used to repay part or all of those debts – just like normal mortgage protection.

I also mentioned the initial funds that each partner put into the business when they set it up.

Each of those £50,000 deposits which were used to buy the first property are directors’ loans to the business.

In the event of the death of one of the business owners, how quickly would the family want that money back?

It is payable immediately, but it would be a problem if the surviving business owners did not have that kind of money available and they would not be in a position to pay it back.

Would this result in the surviving business owners needing to sell one of their properties to release equity? How will this affect things?

Future prospects

I think that over the next few years we’re going to see more landlords moving across to the SPV business model purely for tax reasons but this will open up a whole world of protection opportunities with buy-to-let landlords who have often been a tough nut to crack.

The trick for advisers is to not over complicate your process. Keep it simple and keep things clear.

Build your conversation around two key points: what is the problem and how do we fix it?

Problem: what specifically is the problem? What would happen if? What would the effect be?
Solution: what is the solution to fix this problem?
It does not need to be complicated, but this is another example of where proper financial advice is crucial for your clients.

By Vincent O’Connor

Source: FT Adviser

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Professional landlords increasingly comprise the core investors in the PRS

Paragon revealed a sharp increase in specialist landlord business, up from 79% to 89% of buy-to-let mortgage completions as it reported full year results today.

Specialist business also increased from 88% to 91% of the buy-to-let pipeline, as Paragon’s strategy of focusing on landlords operating in corporate structures and with larger portfolios delivered positive results.

Buy-to-let lending overall was stable year-on-year at £1.480 billion compared to £1.495 billion in 2018, with a 17% increase in the pipeline of business in progress at year end to £912 million.

John Heron, Managing Director of Mortgages at Paragon, said:

“Paragon’s deep expertise in buy-to-let means we are now one of a small number of specialist lenders offering solutions for the more complex requirements of the professional portfolio landlord community..

“Following tax and regulatory changes, professional landlords increasingly comprise the core investors in the UK’s private rented sector and we continue to support them and our intermediaries with enhanced service and tailored products specially designed to meet their needs.”

“Paragon’s results show a 9% increase in total new lending across the Group to £2.5 billion, along with an expansion in the net interest margin to 2.29% (2018: 2.21%) and a 5% increase in underlying profit before tax to £164 million (2018: £157 million)”

Source: Property 118

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Tax changes blamed for rise in repossessions

The tax shake up that abolished mortgage interest tax relief for landlords has been touted as a factor behind the rise in the number of buy-to-let properties being repossessed.

Latest figures from trade body UK Finance showed 800 buy-to-let mortgaged properties were taken into possession in the third quarter of 2019 — 40 per cent up year-on-year.

The total had risen gradually since the end of last year, from 550 in the last three months of 2018 to 590 in Q1 2019 and 640 last quarter.

At the start of this year, the Intermediary Mortgage Lenders Association warned there could be a “watershed” moment during 2019 as landlords begin to feel the effects of the tax shake up.

The changes to mortgage interest relief have been phased into the system since April 2017.

Before 2017, landlords could deduct all mortgage interest payments from their tax bills. This meant they were taxed on their profits, not their turnover, so reduced the overall bill.

But the rule changes meant tax relief on mortgage interest was phased out and instead landlords receive a tax-credit based on 20 per cent of the interest payments.

Based on a property yielding £950 in rent and a £600 mortgage per month, the landlord’s income could drop by about 57 per cent after the rule changes, as the shown in the table:

Tax yearProportion of mortgage interest landlords can deduct from their tax billsTax billPost-tax and mortgage rental income
Prior to April 2017100%£1,680£2,520
From April 20200%£3,120£1,080

Source: Which

David Smith, policy director for the Residential Landlords Association, said: “We said at the time people would be blindsided [by the tax changes].

“Some landlords would have been unaware of the tax changes until they felt them and by that point, they were halfway through an even more challenging tax year.”

Mr Smith thought the government had failed at speaking directly to landlords about the changes, adding he was “massively concerned” about the future of the buy-to-let market.

Dan White, director at Champion Hall and White, agreed. He said: “This may well be the effects of lack of preparation, knowledge and understanding of the tax changes which could well be a result of higher tax bills which were not budgeted by landlords.”

Mr White also said landlords looking to exit the market could be struggling the sell in a stifled property space, resulting in unoccupied properties, arrears and more repossessions.

L&C Mortgages’ director of communications David Hollingworth said it was crucial landlords took advantage of the competitive mortgage rates on offer to manage their costs as well as possible as the changes to tax relief were “feeding through”, while Nick Morrey, product technical manager at John Charcol, said some landlords had probably “thrown in the towel” over the tax changes.

Alan Lakey, director at Highclere Financial, said the market had experienced a “vile mix” of changes which were a “recipe for repossessions”.

Other changes to the buy-to-let space included a 3 per cent stamp duty surcharge for second homes and more stringent affordability testing from the Bank of England.

Martin Stewart, director of the Money Group, said: “I would suggest this a very worrying trend, not only for buy-to-let but for the wider lending environment.

“The good ship UK has been taking on debt for the past ten years and with the seas about to get choppy, I just hope there are enough lifeboats for everyone.”

The Treasury declined to comment due to pre-election restrictions but has previously said the rationale for the policy was that the previous tax system had supported landlords “over and above” ordinary homeowners.

In the Summer Budget of 2015, when the rules were announced, the Treasury stated the ability to deduct mortgage interest costs put investing in rental property “at an advantage”.

By Imogen Tew

Source: FT Advised

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Buy To Let Repossessions Up In The UK

The number of buy to let repossessions of investment properties in the UK rose substantially in the third quarter of 2019.

Figures released this week from banking trade body UK Finance revealed a 40 per cent rise in buy to let repossessions on last year.

Around 800 buy to let repossessions were carried out in the third quarter of 2019, compared to 570 in the same quarter of the previous year.

However, there were 4,550 buy to let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the third quarter of 2019, five per cent fewer than in the same quarter of the previous year.

The number of buy to let investors in arrears of between 5 per cent and 7.5 per cent of the outstanding balance also fell by 21 per cent over the year.

In contrast, the number of buy to let investors in arrears of between 7.5 and 10 per cent grew by 9 per cent, while the number in arrears of over 10 per cent dropped just 1 per cent, according to the UK Finance figures.

However, the banking trade body has stated that it believes the large increase in buy to let repossessions due partly to a ‘backlog of historic cases’.

Rules were changed two years ago by the city regulator on how lenders have to calculate how much a borrower owes each month if they fall into arrears. This has led to lenders reviewing a large number of cases on an individual basis and applying for buy to let repossessions ‘only when all other options have been exhausted’ according to UK Finance.

However, David Smith of the Residential Landlords Association (RLA) said: ‘Repossessions for mortgage arrears take place for many different reasons.

‘Mortgage interest relief changes, which are now almost fully implemented, the increasing cost of regulation and the ever-increasing time to repossess a property are all major factors.’

‘Since most repossessions of this kind lead to tenants being evicted it is vital that the next government actively supports the majority of landlords doing a good job to provide the homes to rent the country needs.’

Source: Residential Landlord