Buy-to-let: landlords caught between high rates and squeezed tenants
Views from the top make a hillwalker’s arduous climb worthwhile. It is getting down that strains the sinews. UK challenger banks have a similar problem. Many specialise in buy-to-let residential mortgages. Some senior bankers privately believe higher interest rates will expose these to exceptional strains.
Banks such as OSB Group and Paragon, at peak profitability, say they see no signs of stress on their BTL loan books. Even so markets have walked their share prices down 30 per cent since mid-August, a steeper fall than for high-street banks. They trade at mid single-digit forward price/earnings ratios.
There is genuine reason for concern. Typical fixed five-year UK mortgages rates have soared this year, from below 2 per cent to more than 6 per cent today. BTL mortgages are typically interest-only, which means they lack the safety valve of lower capital repayments.
This story originally appeared on: Financial Times - Author:Tax Cognition
