CBID Seminar with Dr Lakshmi Naaraayanan (London Business School)

Individual Landlords in the Mortgage Market

Abstract 
We use administrative data on the universe of mortgages to individual landlords in the United Kingdom to study their asset and financing choices. Larger landlords achieve significantly higher rental yields, in part explained by location choices. Most landlords purchase properties close to their home. While smaller landlords achieve lower yields on properties further away, the reverse is true for larger landlords. This suggests that for the latter group the benefits from easier monitoring of their investments outweigh the costs of portfolio concentration. The analysis of the financing choices, which leverages a large unexpected interest rate increase event, shows that lenders increase mortgage rates less for larger landlords, while charging higher fees, allowing a reduction in interest coverage ratios. We also find that the same event is associated with an increased likelihood of a property sale by individual landlords. 

About Dr Lakshmi Naaraayanan
Joining LBS after completing a PhD in Finance at the Hong Kong University of Science and Technology, Dr Naaraayanan’s research interests lie in the area of empirical corporate finance – including corporate governance, entrepreneurship, financial intermediation, and law and finance. His research has won several awards including the USC Marshall School of Business Trefftzs Award at the Western Finance Association Meetings. His work has been featuring in numerous publications such as the Financial Express, Forbes, Oxford Business and Law, and the World Bank.