The news about decreasing mortgage rates is creating a false sense of positivity among some landlords. It’s true that a number of deals are now below 4% but the best rates are reserved for borrowers who meet strict criteria, for those willing to tie in for 5 or even 10 years and for people prepared to pay an elevated arrangement fee.

Mortgage costs soar for landlords

So where does that leave landlords with home loan finance? If new figures are to be believed, they are heading for the exit. Figures obtained from Cornerstone Tax in January revealed mortgage repayments have hit 140% of 2022 levels. It was a similar story at Simply Business, who reported that 31% of landlords saw their monthly mortgage repayments increase between 2022 and 2023.

These sky-high mortgage repayments are unsettling property investors who need to remortgage, have additional borrowing needs or who want to expand their portfolios. During a recent survey conducted by our sister company, Open Property Group, 16% of landlords questioned said they were quitting buy-to-let due to rising mortgage costs.

Additional analysis by Hamptons found UK landlords are collectively paying £15bn in mortgage interest annually. This is a 40% rise over the course of the last year, translating to an extra £4.3bn leaving landlords’ pockets over 12 months.

It’s therefore no surprise that the number of landlords in arrears has been increasing. According to the banking trade body, UK Finance, the number of buy-to let-mortgages in arrears doubled in the year to October 2023, with 11,540 home loans where payments were late or had been missed.

Mortgage rates have more than doubled in 4 years

Buy-to-let rates hit rock bottom in 2019, when one lender’s lowest deal was 1.40%. Increases did follow but compared to today’s rates, the figures were very low. Analysis by Moneyfacts showed that between March 2020 and March 2021, average buy-to-let mortgage rates were 2.02% for a 2-year fixed buy-to-let mortgage at 60% loan to value (LTV), and an average of 2.42% for a 5-year fixed at the same LTV.

Fast forward four years and figures released by L&C suggest the best two-year buy-to-let mortgage rates were in the region of 3.9% and 4.05%, but those products came with a hefty 5% arrangement fee. The best five-year buy-to-let mortgage rates were between 4.14% and 4.39%, while variable mortgage rates could be secured for between 5.19% and 5.44%.

High mortgage rates have been compounded by news that UK rents are decreasing, as we reported in this blog. It’s a market factor that’s weighing heavily on the minds of property investors – as is the small increase in inflation seen in January 2024 and a looming General Election.

Many landlords are talking to LandlordBuyer about selling their buy-to-let as they’re fed up with the volatility of the mortgage, finance and lettings markets. Our sell house fast service is designed for a speedy buy-to-let exit, with cash offers made on all let properties, including those with sitting tenants and those with short leases.

A cash sale to LandlordBuyer is the ideal solution when landlords can’t afford their mortgage repayments and we’ll even offer on buy-to-lets where the mortgage is in arrears. Contact us or get your free cash offer online here.

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