Currently landlords are enjoying a buoyant rental sector. Interest rates remain low, meaning landlords have enjoyed relatively low mortgage repayments, and rents are at an almost record high, providing a very cash positive situation for those who have invested in property, according to Landlord Assist.

But the rosy outlook outlined above could easily change when the cost of borrowing starts to rise.

“Many landlords are only able to trade currently due to the low interest rates and the resultant low mortgage payments on their properties and a rise in interest rates could cause financial problems for many investors,” said Stephen Parry, Commercial Director at Landlord Assist,

“Landlords need to be aware that interest rates will go up at some point and start to prepare for the subsequent impact. Those landlords who bought investment properties at a 3 – 5 % yield in 2007 will most likely find that the rent will no longer cover the mortgage once interest rates resume to more normal levels. This could mean incredible financial pressure for some and doubtless a further surge in the number of properties being repossessed.”

Graham Kinnear, MD at Landlord Assist is also concerned by the prospect and he said: “Whilst my belief is that interest rates may remain at very low levels for several months yet, a very real problem is potentially on the horizon. The market for disposing of buy-to-let assets is far from buoyant and once rates increase many landlords will be sustaining crippling monthly losses on their properties.

“We would like to see banks looking at adapting their mortgage books to allow landlords to retain their property and trade their way through the cycle. By extending the term of a mortgage a landlord may be able to retain the property which would be in everybody’s interest. We are keen to learn what proposals banks have for their customers in dealing with the inevitable rate rises.”