Landlords with high loan-to-value (LTV) ratios have been hit “especially badly” by the economic downturn, it has been claimed.
Residential Landlords Association chairman Alan Ward said that falling property prices have been detrimental to the sector, with some lenders demanding further equity or more money to bring LTVs back in line.
“If you borrow £500,000 on a 100 per cent mortgage and the value of property drops by 20 per cent, the lender can demand £100,000 from the borrower,” he explained.
Earlier this week, Sainsbury’s Finance published figures which showed the value of private landlords’ properties fell by a total of £118.4 billion between the first quarters of 2008 and 2009.
However, there are some positives for landlords at the moment, with rental demand “good”, according to Mr Ward.
The FindaProperty.com Rental Index revealed last month the average rental price rose during June for the first time since August last year.
By Chris Trimble