Landlords hit hard by Soaring Mortgage Costs

Monthly interest costs have surged by 283 per cent since 2021 for landlords using interest-only mortgages, research shows.

Octane Capital compared rates in October 2023, for a 75 per cent loan-to-value two-year fixed rate buy-to-let mortgage, with previous rates on an annual basis over the past decade.

The average BTL mortgage rate available was in steady decline due to the base rate remaining at historic lows since 2009: it dropped from 5.06 per cent in October 2012 to a low of 1.65 per cent in October 2021, just before interest rates climbed steeply until this autumn.

Landlords making a full monthly repayment were paying an average of £804 per month, while those making interest-only payments were paying just £272 per month.

Since 2021, BTL mortgage rates rose from an average of 1.65 per cent in October 2021 to 5.72 per cent in October 2023. Property prices also rose, from £363,333 in 2021 to £291,385 in 2023.

The average landlord is now paying £1,371 per month when making a full monthly repayment, an increase of 71 per cent versus October 2021.

But landlords making interest-only payments on their mortgage saw a far steeper hike in costs, climbing to £1,042 per month – an increase of 2843 per cent.

Octane chief executive Jonathan Samuels says: “Those who opt to pay an interest only payment have seen a particularly large jump in the monthly cost of their mortgage and so it’s no wonder many landlords are dubious about their future in the sector and the profitability of their portfolio.

“One positive is that buy-to-let rates now seem to be on the slide, after increasing rapidly between 2021 and 2022.

“With the Bank of England holding the base rate since August, it seems that trend could continue as we move into 2024.”