Typical monthly interest payments on buy to let mortgages have soared by an average 75.7 per cent in the past year.
Landlords making a full mortgage repayment each month have seen an increase of 31.6 per cent.
Octane Capital analysed the current cost of the average buy-to-let mortgage and how this monthly repayment has increased in the last year as interest rates have climbed ever higher as a result of the disastrous Liz Truss mini-Budget and rising inflation.
The research shows that currently, the average buy-to-let investor is borrowing £217,364 after placing a 25% per centdeposit on the average UK property price of £289,819.
With a current average buy-to-let mortgage rate of 5.32 per cent, this would see the average investor pay back £1,312 when making a full monthly repayment.
The average mortgage rate has increased by 2.12 per cent in the last year alone, meaning that the average monthly cost of a full mortgage repayment has increased by 31.6 per cent, adding £315 to the cost of buy-to-let borrowing.
However, many buy-to-let investors will opt to simply maintain the mortgage secured on an investment property by way of monthly interest only repayments.
The figures from Octane Capital show that in the current market, the average interest only monthly repayment has climbed to £964 per month, an annual increase of 75.7 per cent, or £415 per month.
Octane chief executive Jonathan Samuels says: “It’s not just residential buyers that will have shuddered at the news of an eleventh consecutive interest rate hike last week, with buy-to-let investors also seeing the cost of borrowing climb substantially.
“These increased mortgage costs will further reduce a profit margin that has already been dented due to numerous government legislative changes in recent years.
“Despite this, we’ve actually seen an increase in the total value of buy-to-let loans issued in the last year which suggests that, despite all that’s been thrown at them, the nation’s landlords are still largely undeterred and the buy-to-let sector itself remains a lucrative one for those looking to invest in the right areas and with the right financing in place.”
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Gove was harping on about Landlords hiking rents way above inflation but omitted the 75% hike in interest rates.
One of my fixes is ending next month. It is currently 1.99% and will be 4.99% (if I don't want to add a big product fee). That's a 150% increase.
I'm not convinced it was much to do with Liz Truss though. Interest rates had risen multiple times before her few weeks as PM. Reckless spending by Sunak during the pandemic and dithering by the BoE would be my guess.
Jo
You're right. I got my sums wrong. It was a bit too early for my brain I think!
Base rates have risen hugely in the US and the European Central Bank. This of course has an effect on our interest rates. In March the Fed raised rates to 5% and the ECB raised rates to 3.5% on 22 March. BofE raised our rates to 4.25% on 23rd March. If we didn't raise our rates it would affect our balance of payments and drive money/investment away from the UK towards higher returns in other countries. This is an international problem and can't really be laid at the door of that unfortunate budget!
Is anyone else finding it hard to reconcile the end quote with what we hear about LLDs selling up:
“Despite this, we’ve actually seen an increase in the total value of buy-to-let loans issued in the last year which suggests that, despite all that’s been thrown at them, the nation’s landlords are still largely undeterred and the buy-to-let sector itself remains a lucrative one for those looking to invest in the right areas and with the right financing in place.”
But we don't know if Octane Capital compared the total value of BTL loans to increases (?) in total purchase prices; increases (?) in the % of loans to purchase prices; or possibly both.
Obviously Octane are finding some new BTLs, but we cannot be sure from their figures that the number of these equals or outweighs the numbers or old BTLs being sold.
And this is only one company.
Perhaps someone more knowledgeable can enlighten us.
Henry S -I agree with you - Octane capital being a lender will want to promote confidence in market. We have seen similar “soothing platitudes” from many agents probably as a result of seeing their supply of rental stock plummeting Locally I am seeing a steady stream of properties that were previously rented come to the sales market and very view reappear as rentals. I cannot see anyone wanting to releverage at this time! I Do not believe that final paragraph
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