Research into BTL mortgage arrears – University of York

Hello Alison and welcome to Property118

As discussed in our telephone conversation this afternoon we are honoured that you have chosen the Property118 forum to reach out to the landlord community for the purpose of your research.

Whilst I have no personal experience of mortgage arrears I do speak with many landlords who have had problems.

Primary causes include:-

• Failure on the landlords or letting agents part to complete satisfactory referencing on tenants
• The financial failure of letting agents which do not have client money protection and professional indemnity insurance - related to this is that landlords often don't think to check their agents have this insurance cover
• Landlords failure to obtain suitable guarantors for tenants which have a less than perfect financial record
• Landlords failure to budget for maintenance
• Landlords failure to budget for void periods
• Landlords failure to assess rental demand prior to purchasing
• Landlords failure to insure health/life of a partner to a mortgage
• Landlords failure to respond quickly to market conditions
• Landlords being too soft with bad payers
• Landlords not knowing where to seek help
• Lack of education for landlords and awareness of where to obtain quality training which isn't being offered by a "get rich quick guru" with a hidden sales agenda

As you will see, I genuinely believe the primary reasons for landlords experiencing financial hardship are a direct result of their own incompetence. There are of course always going to be exceptions which others here will no doubt be only too keen to point out.
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I think it's also worth adding to Mark's list:

the slow legal process in evicting bad tenants (it can take many months to get bad tenants into court).

the lack of enforcement options against low income tenants, (landlords need to be given the power to enforce debt orders by means of direct deduction from people's benefits, but this power is not available to county courts, only to magistrates courts for council tax and fines).

delays caused by the court system (it takes months before landlords can apply to the court, it can then take months for the hearing to be listed).

delays caused by the Housing Benefit system, (as Councils can take many weeks or even months to determine a HB claim).

These causes of mortgage arrears are of course mainly applicable to low income tenants, or tenants on benefits, but could also apply to other tenants in some circumstances. It should always be remembered that professional tenants can become DSS tenants very easily, so no matter how good the tenant referencing, peoples circumstances do change and this can impact on their ability to pay the rent.

"letting to tenants on housing benefit for example"

I completed an FOI request regarding Housing Benefit tenants in the City of Bradford, that shows that more than 20% of all claimants were (at least) eight weeks in arrears.
This was at a time when LHA can be paid direct to landlords.
The changes towards universal credit may remove that protection form Landlords in order to give tenants "independence".

One interesting point to note is 8 weeks is the amount of arrears you need to issue a Section 8 Fault Based Possession.

A new headline may well read "20% of all LHA Claimants in Bradford are vulnerable to being homeless."

(FOI request was made 05/2012)

I will let you do the maths, if Bradford average weekly rent is £104 multiplied by eight and the 20% of the total claimants. I imagine its a pretty sum that will effect Mortgage Arrears.

Hi Alison,

You would be welcome to post your request to hear from landlords on Property Tribes.

We often get asked to help with research or provide quotes for national newspapers, and are always happy to do this.

My previous posts focussed on factors which landlords "could" control if they knew how. There are, however factors they cannot control, politics being a prime example.

Many of the licensing schemes, including landlord registration in Scotland, HMO licencing, selective licensing and additional licensing increase costs for good landlords without having much if any impact on the criminal elements we are told they are intended to regulate. These extra costs are eating into profit margins which will disappear when interest rates increase. Landlords can plan for increased interest rates and often do. However, they can not plan for additional costs of politically motivated schemes.

I would urge the university researchers to read the following threads, discussions and links within the main articles and comments to gain a better understanding of the underlying issues:-

Enforcement not legislation - http://www.property118.com/enforcement-not-legislation-prs-hit-squads/43894/

The alternatives to Landlord Licensing http://www.property118.com/alternatives-to-landlord-licensing-schemes/42246/

Another external factor to consider is mortgage lenders changing their borrowers perceived terms of their contracts. The impact of some lenders changing their terms will have a ripple effect. For example, where tracker margins have been increased by West Brom and Bank of Ireland many of these borrowers will have accounts with other mortgage lenders. The impact on cashflow will affect the borrower as a whole, not just the mortgage account to which the increase relates. See this particularly long discussion thread >>> http://www.property118.com/west-bromwich-building-society-mortgage-company-increase-tracker-margins-legal-action/43657/

Other readers may also wish to comment on the impact of article 4 planning.
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Thank you for the messages and comments on here. Much appreciated.
And thanks Vanessa for telling me about Property Tribes, I'm heading there now!

Please do get in touch if you have experience of arrears and can help with the project, it would be enormously helpful.

Alison

Reply to the comment left by "Dr Alison Wallace" at "08/11/2013 - 13:49":

****** £30 John Lewis shopping voucher offered for each interview ******

Thank you to the people who have got in touch already. I will be in touch again soon.

Can I just confirm that I can now offer £30 John Lewis voucher as an additional thank you for each individual landlord who talks to us in confidence. Please do get in touch if you're happy to share your experiences.

Kind regards,

Alison

Hi Doctor Wallace,

Can I ask how long your study is running for?

The reason I ask is that we will be holding the Property118.com Virtual Property Show in May 2014 and if the study is still on going into May next year I think it is an event that could aide your research.

The event will bring together property professionals from all areas of the industry and will be attended by many Landlords and I imagine some of the Landlords who attend will have direct experience with this.

One facet of the show is our Networking Lounge where people can chat live via social media channels and interact.

The show is virtual so therefore can be accessed from your home or office as long as you have a computer and a internet connection.

It is free to attend and all you have to do is register and we would be more than happy to accommodate you in our Networking Lounge so you can meet the Landlords in attendance.

You can register at: http://www.property118-virtual-property-show.com/

If you have anymore questions do not hesitate to contact me via our page here.

Thanks,

Phil

Reply to the comment left by "Phil O'neill" at "15/11/2013 - 11:11":

Hi Phil,

Thanks for your message. That event does sound ideal but the study only runs until the New Year I'm afraid. I'd like to speak with landlords this side of Christmas really.

Thanks again though.

Regards,

Alison

Reply to the comment left by "Dr Alison Wallace" at "15/11/2013 - 11:16":

Hi Dr Wallace,

No problem and good luck with your study.

Feel free to register and come along anyway as you may find the information available applicable to any future studies and work you have planned considering you work at the Centre of Housing Policy!

We also hope this will be the first of many shows so we would be more than happy to see you there!

Thanks,

Phil