Well over half of those investors who recently secured buy to let mortgages risk facing losses when mortgage interest tax changes make their full impact in 2021.
That’s the gloomy view of credit rating agency Standard & Poors; its report entitled Buy to Letdown? warns that 62.5 per cent of loans taken out from 2014 to 2016 will become loss making by 2021 when the tax relief changes conclude.
The report also says 81.1 per cent of investors who took out loans between 2014 and 2016 would struggle to maintain the same leverage if they applied today.
They would typically need to drop down the Loan To Value scale by 9.4 per cent in order to remortgage on a similar basis.
Before Bank of England-inspired controls were introduced in 2016, investors were typically stress tested against an income coverage ratio of 125 per cent.
However, now the stress tests by different lenders usually expect 140 per cent or more against a notional mortgage interest rate of 5.5 per cent.
And although investors in London and the south east have usually borrowed most, S&P warns that investors in northern England are actually most at risk as a result of low levels of rental growth in the region in recent years.