Mortgage arrears among landlords increased by 6%, from 4,700 to 5,000, between July and September last year, which was the first increase since records began two years ago, according to the Council of Mortgage Lenders.

Following a stampede of buy-to-let activity early last year ahead of the introduction of the 3% stamp duty surcharge in April 2016, fewer investors are now adding to their property portfolios. But some experts fear that many buy-to-let landlords, especially those entering the sector for the first time, rushed into acquiring property that they could not afford last year to avoid being hit by the higher tax on additional homes.

Richard Lambert, chief executive of the National Landlord Association (NLA), told the press: “Some first-time landlords may have rushed in to the market ill-prepared to beat the stamp duty hike.

“Unless landlords begin to make plans to mitigate the impact of these changes, it’s likely that buy-to-let mortgage arrears will continue to rise.”

The rise in the volume of landlords falling into arrears has led to concerns that thousands more landlords could fall into debt when they are hit by further tax hikes from April.

The existing rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.

The NLA estimates that around 440,000 basic-rate tax payers will be forced into a higher tax bracket from April 2017 once planned changes to landlord taxation comes in to force.

By April 2020, once they have been withdrawn altogether, the disastrous consequences of Section 24 will mean that it is likely that higher-rate tax payers will only receive 50% of the relief that they currently get, with various experts having already warned that landlords will be left with little alternative but to pass higher costs on to tenants.

Tags: Mortgages, Rental Reform

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Number of buy-to-let landlords struggling to pay mortgages hits 2-year high