AN insolvency expert in Huddersfield has warned that more mortgage lenders could follow Northern Rock into dire financial straits as bad debt levels mount among buy-to-let property investors.
Insolvency practitioner Andrew Wilkinson, who is also chairman of Huddersfield Liberal Democrats constituency party, said he feared lenders could end up with arrears running into billions of pounds as borrowers defaulted on their loans.
In a letter to Lib Dem Treasury spokesman Vince Cable, he said: “I am persuaded that we have only just seen the beginning of the credit crunch. There is much more to come involving several high profile domestic lenders.”
Mr Wilkinson said that an “alarming” rise in consumer bankruptcies was being followed by more bankruptcy cases involving people who entered the buy-to-let market over the past few years.
He said many of these investors had taken out 100% mortgages on properties whose values had been “shamelessly ramped” by the developer.
“The typical debtor that I have seen has eight properties where the rental yield on each property only just covers the mortgage repayments and sometimes not even that,” said Mr Wilkinson.
“In addition, there are often management fees outstanding. No allowance is made for void periods.
“These debtors will have appreciated that they have a problem for some time, but will typically top up the mortgage payments out of their own pockets.“Some tell me that the market will revive within five years. Others seem to have faith in lawyers who claim to be launching class actions against the developers and agents who sold the plans!”
