Buy-to-let landlords have been given a helping hand by the fall of the base rate, which has had a knock on effect on their mortgage payments.
Last year, landlords were struggling to keep up with expensive buy-to-let mortgage
repayments and the difficulty of refinancing their loan, but they have seen rates fall in line with the base rate in recent months, which the Bank of England has cut to 1.5 per cent.
Buy-to-let mortgage specialist Paragon reported a doubling in its levels of mortgage arrears in the three months between September and December last year, while buy-to-let landlords faced a competitive rentals market combined with high interest rates and the prospect of negative equity as a result of falling house prices.
But Paragon has since noticed that four consecutive base rate cuts have filtered through to the mortgage
market and are helping "landlords benefit from wider rental margins" which will, in turn, improve the lender's "customer payment performance."
Paragon closed its doors to new business last year amid "extremely difficult" trading conditions when credit dried up.
"Mortgage rates have now fallen significantly as a consequence if the reduction in interest rates." the group said In its interim management statement. "This should ease the pressure on arrears."
The base rate cuts have meant real savings for buy-to-let landlords, who last year were paying an average eight per cent interest through Paragon, the lender's chief executive Nigel Terrington said, but are now paying about four per cent.
In its interim management report, Paragon also reported that The Business Mortgage Company Limited (TBMC), in which it took a 33 per cent stake in January 2007, is likely to report a loss for the year as a result of the "significant downturn in market activity during 2008."
Consequently, Paragon has agreed to suspend interest on its £15.75million loan to TBMC in return for the remaining 67 per cent share in what it described as a "strategically important" mortgage broker.
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