Buy-to-Let Mortgage Arrears to Drop Below 7,000 by the End of the Year

Buy-to-let mortgage arrears are expected to drop below 7,000 by the end of the year, according to Keystone, the complex buy-to-let, commercial mortgage and short-term finance lender.

The prediction, based on official Council of Mortgage Lenders (CML) data, suggests that the number of buy-to-let mortgages in arrears across the UK will fall below 7,000 by the end of 2016.

Latest official estimates indicate that 9,300 buy-to-let mortgages were in arrears in the first quarter (Q1) of the year, down from 10,300 in the previous quarter and 11,300 in Q1 2015.

Buy-to-Let Mortgage Arrears to Drop Below 7,000 by the End of the Year

Keystone’s forecast estimates that, as of Q2 2016, 8,500 buy-to-let mortgages are in arrears by more than three months in the UK. This is expected to fall to 6,600 by Q4 2016.

The Managing Director of Keystone Property Finance, David Whittaker, comments: “The referendum result was unexpected, the precise impact is unknown, and it is still rather early to tell what will happen. But we have seen no let-up in demand for buy-to-let mortgages and we don’t expect to see any change in the downward trend in buy-to-let arrears as a result. Landlords are confident – and lenders have no reason to feel any differently.”

Despite wider uncertainty in the lending market following the EU referendum, Keystone reports that it is continuing to write new business.

The firm has confirmed that all three of its funding lines are still open: Paratus AMC funds Keystone’s buy-to-let products; Together funds ranges aimed at residential and commercial landlords with some adverse credit; and Aldermore Bank funds Keystone’s Loyalty Range – a series of buy-to-let mortgage rates exclusively available to Keystone customers who have other Keystone-Aldermore products.

Whittaker continues: “There are many landlords out there who still need finance, particularly professionals who are in the process of remortgaging to secure a solid five-year fixed rate or selling their personally-owned portfolios to their limited companies.

“We have ensured Keystone has the funding lines in place to provide landlords with the solutions they need and in the four weeks since the vote we have forged ahead with our lending. We are increasing traction with brokers and investors. Optimism is the keyword here.”

Keystone has recently launched an online portal, KASS, which allows brokers to submit and track all Classic Range cases and earn an increased procuration fee of 0.6%.

In response to CP11/16, the PRA’s consultation paper, which proposed stricter underwriting criteria for buy-to-let, Keystone has introduced separate stress tests for individual and limited company borrowers applying for products in the Classic Range.

For individuals, the new formula of 145% at pay rate or notional rate of 5.25%, whichever is higher, will be applied to term trackers and three-year fixed rates. For borrowers choosing a five-year fixed rate product, the pay rate will be used.

Stress tests for limited companies will remain at 125% of pay rate or notional rate of 5.25%, whichever is higher, for term trackers and three-year fixed rates. For limited company borrowers choosing a five-year fixed rate, the pay rate will be used.

Whittaker adds: “We’ve also improved our criteria for landlords looking to finance larger multi-units. We’re accepting six flats in a block as standard and we’ll consider up to eight on a case-by-case basis. Keystone is tackling market changes head on.”