Landlord profits wiped out as buy-to-let rates double | Surging costs will both deter investors from buying and push others to sell up

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  1. Currently free to read, but in case it gets paywalled; article contents:

    *By Melissa Lawford, 13 August 2022 • 7:00am*

    Landlord profit margins are getting hammered as buy-to-let mortgage rates more than double, new data shows.

    Investors purchasing in August will have to pay an extra £2,784 per year in mortgage interest than if they had bought in January as interest rate rises push up the cost of borrowing.

    The average rate for a two-year fixed-rate 60pc mortgage has surged from 1.69pc to 3.43pc in the last eight months, according to Property Master, a buy-to-let mortgage broker.

    This follows the Bank of England’s six consecutive increases in the Bank Rate from 0.1pc in December to 1.75pc this month.

    A landlord taking out a typical £160,000 buy-to-let mortgage will now have a monthly bill of £494 – £232 more than if they had purchased at the start of the year. Over the course of a two-year fix, this will be an extra bill of £5,568.

    The rate for the same mortgage with a five-year fixed-rate deal has also surged from 1.94pc to 3.5pc over the same time period. This means a typical landlord will pay £481 per month, an extra £208 compared to if they had purchased in January. Over the five-year period, they will pay an extra £12,480.

    Further interest rate rises are in the pipeline, with market forecasters expecting the Bank Rate will hit 3pc next year. This will bring more jumps in mortgage rates.

    Angus Stewart, of Property Master, said: “The cost of buy-to-let mortgages continues torise inexorably.”

    Alongside the Bank Rate rises, landlords also face higher costs because some lenders are using higher rates to manage demand, Mr Stewart said. “Others are taking the opportunity to widen their margins.”

    The jump in costs mean smaller, part-time or accidental landlords will be shut out of the market, Mr Stewart warned.

    “For many of the smaller players in this market, unaffordable rises in mortgage costs will undoubtedly lead them to conclude buy-to-let no longer works for them,” he said.

    Rising interest rates will hit landlords’ profit margins particularly hard because investors can no longer offset all of their mortgage interest payments against their tax bill — since April 2020, they only get a 20pc tax credit.

    Surging costs will both deter investors from buying and push others to sell up, as they come to the end of their fixed-rate deals and have to remortgage at much higher rates.

    Property Master tracks 30 lenders, who together constitute around 75pc of total buy-to-let mortgage lending.

  5. Or they’ll just turn their once 3 bed family home into a 5 bed HMO and rinse it for as much as they can. No sympathy for landlordism.

  6. Anyone not yet on the housing ladder should be pleased with rising interest rates. Sure it makes borrowing harder – BUT it pushes speculators and land monopolists to release inventory for sale which will drive down house prices.

    The question remains if enough volume will be released to overtake the increased borrowing costs. Given how many speculators have been getting fat on cheap money it wouldn’t surprise me if the majority of BTLs were on such thin margins that they will need to sell.

  7. Oh no, what a shame for them. Guess they’ll just have to downsize their property portfolios, the poor buggers.

  8. It will also reduce the amount of landlords and rental properties in the market pushing up rental prices on those who are either not in a position to or do not want to purchase a property. As rents in places like London are already up 10-15% this year, this is not good news for renters.

  10. Anyone thinks this will benefit 1st time buyers is nuts. Prices will keep increasing – slowly at best.

    Or these houses will just be turned into HMOs, which obviously the neighbour’s love.

  18. I have zero issue with non dickhead landlords. Most of them had a bit of luck, hard work, well paying job or a parent dying and used the money within the rules.

  22. Well, maybe if they cut out their daily starbucks and stopped wasting money on avocados, they wouldn’t be in hardship!

    No sympathy for landlords, the majority of whom are nothing better than worms.

  25. I have little sympathy for the ‘profits’ being wiped out. A £300 mortgage is being rented for ~£800p/m, the family renting is being rinsed and buying that person another property. I hate BTL properties entirely.

  27. Investments go down, as well as up. They should have known this was a possibility, even with the government doing all it could to prevent this. The worrying thing is that it will be banks and investment firms licking their lips at this, ready to snap up houses for their own portfolios. It won’t be couples looking for their family home or young people looking to move out of their parents that will benefit most from this.

  28. >Landlord profits wiped out as buy-to-let rates double

    If you are buying a second home to pay the mortgage on your home then yeah true but most landlords have loads of houses and flats so it wouldn’t really bother them.

  34. All this will do is push out the small boys and properties will get consolidated to a few major investors

  35. Great. Rent going up again I guess.

    Times are good? Rent skyrockets. Times are bad? Rent skyrockets. We can’t go on with this country. People can’t afford to live anywhere on high wages anymore.

  37. The BTL landlord is just being replaced by the corporate landlord. Private equity, pension funds, sovereign wealth funds, are entering the market in a big way.

  39. They bought a fundamental human right that was turned into a speculative asset that the economy was lynch pinned on, and are now upset it didn’t work out…

  41. They’re still getting the biggest chunk of their mortgage paid for them so no, their profits are not being wiped out as they can still sell their ‘investment’ at a huge gain.

    Fuck’s sake Torygraph, you pile of cunts.

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