Negative equity threat to buy-to-let

Posted: 21 Nov 2008 12:15:40 GMT

About 40 per cent of buy-to-let mortgages are likely to suffer from negative equity by the middle of 2009, a report from Standard and Poor's (S&P) has predicted.

S&P suggests that a high proportion of such mortgages will hit negative equity because of the number of properties which were bought up at the height of the housing boom.

With the most inflated properties likely to suffer from negative equity first, S&P has also predicted a wave of repossessions, which could flood the market with more affordable homes.

"Around 20 to 40 per cent of buy-to-let borrowers could fall into negative equity by mid-2009, based on a peak-to-trough house price decline of around 25-30 per cent," S&P has stated.

"We believe that the buy-to-let sector could suffer above-average loss severities on repossession cases due to a concentration of certain property types that are witnessing above-average price declines," explained Kate Livesey, an analyst at Standard & Poor's.

However, with estate agents' fees still high, affordable homes are often still out of reach, but finding a property online could prove cheaper for many.

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