For applications made under limited company structures, the average personal guarantee demand from mortgage lenders has jumped 32% to £424,140 in 2024, Purbeck Insurance Services reveals.
The latest figure has increased from £320,298 in 2023.
With house price values increasing and recent interest rate cuts to buy-to-let (BTL) mortgages, Purbeck Insurance Services says professional landlords searching for a new mortgage deal are reminded of the personal guarantee risks.
Purbeck Insurance Services managing director Todd Davidson says: “Limited company BTL mortgages have their advantages but can also pose a serious financial risk. A level of risk that would not be covered by rent guarantee insurance.”
“Timing is everything in the mortgage market and further reductions to the base rate could be off the agenda given the recent rise in inflation. If landlords are looking to remortgage to take advantage of the fall in rates or plan to expand their portfolio as the property market recovers, they should know that they will, in most cases, be asked to sign a personal guarantee as a condition of the mortgage.”
“The mortgage lender is then provided with direct recourse to the professional landlord’s personal estate should the landlord fall into arrears and there is a shortfall following property repossession by the bank.”
Earlier this month, HM Revenue & Customs data revealed that purchases of BTL properties and second homes have fallen to their lowest levels since 2016.
The number of BTL and second home purchases fell by 14% from 224,700 in 2022/23 to 193,700 in the year to June 2024.
Purchases reached a peak of 287,200 in the year to June 2021.
