Buy-to-let landlords reduce borrowing amidst rising rates

The nation’s landlords are responding to higher levels of mortgage interest rates by cutting their borrowing.

The research comes from specialist property lending firm Octane Capital. which compared the total amount of borrowing amongst buy-to-let landlords between Q3 2022 and Q2 2023 and the corresponding period the year before.

It found that buy-to-let landlords reduced their borrowing by around £7 billion over that timespan, from £37.9 billion in 2021-2022 to £30.4 billion in 2022-2023.

In terms of a percentage change, this means that buy-to-let landlords collectively reduced their borrowing by 19.8 per cent in just a single year.

At the start of December 2021 the base rate stood at 0.1 per cent while by June 2023 it reached 5.0 per cent.

Other unusual events - the Russian invasion of Ukraine and the Liz Truss mini-budget for example - also rocked the markets.

The rest of the market followed a similar trend to buy-to-let, as lending to first-time buyers dropped from £68.1 billion in 2021-2022 to £65.9 billion in 2022-23, a reduction of 3.2 per cent.

Meanwhile all other forms of lending fell by 7.6 per cent from £92.2 billion to £85.2 billion.

Remortgage activity rose slightly, from £79.9 billion in 2021-2022 to £81.0 billion in 2022-2023, reflecting how more borrowers consolidated what they had rather than saddling themselves with fresh debt in the form of a new mortgage.

The chief executive of Octane Capital, Jonathan Samuels, comments: “Landlords are taking fewer risks with their borrowing, which makes sense given how the market has become objectively less attractive in the past couple of years.

“No longer are buy-to-let mortgages available for two to three per cent, so it’s less economically viable to invest in property on a highly leveraged basis.

“Now landlords are in a period where they’re adjusting to a new normal, where they need to be strategic and consider using a larger deposit if they want to continue growing their portfolios.”