In the property market, certain challenges have a habit of snowballing. A prime example can be found in the rental scene.
The cost-of-living crisis has taken its toll on renters and landlords alike. In Q1 2024, it emerged that rent arrears jumped 24%[1] year-on-year. Where tenants fall behind on their rent, landlords are likely to fall behind on their mortgage.
“What this eventually leads to is hampered credit scores for landlords,” explained Kieron Coote, one of our senior underwriters here at Market Financial Solutions.
This can raise red flags for lenders. Through no fault of their own, some landlords may suddenly look like they’re bad at making repayments, preventing them from accessing capital.
Fortunately, there are a few ways in which we could help a landlord stuck in this kind of predicament.
“Credit scores can be improved, it just takes time,” Kieron said.
“But in this market, time is a precious commodity. Thankfully, we can deliver extra time for borrowers where needed so they can get their finances in order.
“Say it reaches the point where a landlord needs to find new tenants, secure stable income again, and rebuild their credit score. In the meantime, they’ll still likely need to cover an existing BTL loan. So, we could issue a bridging loan which will deliver between 12-24 months’ worth of breathing space to secure new tenants, get their credit report in a healthier position, and allow them to refinance down the line.”
We also have our bespoke BTL mortgages available for landlords facing tricky or complicated situations. They have been designed from the ground up to bring bridging-like flexibility to the mortgage market, and adapt to the realities of the economy.
We understand that a landlord shouldn’t be defined by blips on their record that were largely out of their control. So long as a borrower’s investment plans make sense, and they have a clear exit strategy in place, we will try to find a way forward.
“When we see missed payments or similar issues, we immediately identify if they were one-offs, or ongoing concerns,” Kieron said.
“During the underwriting, we may go through the borrower’s bank and/or mortgage statements. We’d look to see if they lined up with when the underlying tenants started missing their payments. If that proves to be the case, and we can see outside of this period that the borrower had no issues covering their repayments, we know that this was an isolated incident.
“Also, we could explore their other financial obligations for added security. We may look at their credit card history or direct debit obligations for example.
[1] https://thenegotiator.co.uk/news/rental-market/rent-arrears-climb-24-year-on-year-as-tenants-struggle/
