Soaring buy to let mortgage costs may force landlords to switch

New research showed a large month-on-month increase in the cost of typical buy to let fixed rate mortgages popular with landlords.  

Online brokerage Property Master claims that compared with June, just last month, landlords are now paying up to £59 more per month, including fees, for a typical five-year fixed rate mortgage.  This is an increase of £174 per month since the start of the year.

Angus Stewart, chief executive of Property Master, says: “These latest increases are going to shock many. Landlords, like so many people, are being squeezed on all fronts. Increasing amounts of taxation, regulation and the cost of building materials are already impacting margins.  

|But whilst mortgage rates remained at such a low level the business of investing in property still made sense for so many. Increased mortgage interest costs such as these which, due to tax changes, now can’t be offset for the majority of landlords as they could in the past, are a real threat to landlord profitability.”

He continues: “There are a range of issues at play in the buy to let mortgage market in addition to rising Bank of England rates that are exacerbating the situation for those landlords looking for competitive mortgage finance. Volatile financial markets have impacted on some lenders ability to stay in the market as they would wish whilst others are swamped with applications and are using the blunt instrument of rates to reluctantly control the flow of business.

“Our advice to landlords is to be ready to move very quickly if they do need new finance by having everything in place to go.  Mortgage products can appear and then disappear within a matter of days and therefore to secure a decent rate a landlord needs to have all their information available quickly.  For some it may even be worth paying an early redemption fee to jump on a good new deal.”

A typical five-year fixed rate buy to let mortgage with a Loan To Value of 60 per cent for £160,000 increased from 2.80 to 3.24 per cent - that’s an increase in monthly cost from £388 to £447 or £59 per month more once fees are included.  

The increase was slightly less for two-year fixed rate mortgages.  

The cheapest typical buy to let mortgage is for a two-year fixed rate mortgage, for £160,000 with a Loan To Value of 60 per cent, moved up from 2.69 to 3.12 per cent June to July, an increase in monthly cost from £395 to £452 or £57 per month more, once fees are included.  

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