Rising mortgage rates have reduced landlord earnings by £4,000 on average this year

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Landlords have effectively lost more than £4,000 in earnings per property during the last year thanks to soaring mortgage rates and rising costs.

A landlord taking out a two-year fixed-rate BTL mortgage in June 2022 would have received an average monthly return of £609 from rental income after paying interest, adding up to £7,312 a year, according to personal finance comparison site finder.com.

Taking out that same mortgage in June 2023 would have made 59% less in average monthly returns at just £250, working out at £2,995 – a drop of £4,317 in yearly income.

New deal

The platform compared monthly average buy-to-let mortgage rates, house prices and rent prices to estimate the returns and believes the rising cost of owning a rental property has made it far less appealing for landlords to sign up for a new deal.

Buy-to-let interest rates are still climbing and reached an average of 6.18% in July, while the average UK house price in June was £287,546, according to the latest ONS House Price Index when the average buy-to-let mortgage rate was 5.45%.

As a result, between January and March this year, the value of buy-to-let mortgage lending dropped by 40% to £5.8 billion on the previous quarter while the value of loans granted also dropped by 44%.

The share of homeowner loans granted for buy-to-lets was also just 9.8% of total mortgage lending in Q1, the lowest share since 2011, which suggests that fewer people are looking to invest in the sector, according to Kate Steere (pictured), housing expert at finder.com.

“We’re seeing a trend of landlords pulling out of the buy-to-let market as consecutive base rate hikes have made it unprofitable for them to continue,” says Steere.

“This will have a worrying impact on an already competitive rental market, leaving renters with fewer options and rising costs as they attempt to navigate the cost-of-living crisis.”

Read more about mortgage interest rates.

View Full Article: Rising mortgage rates have reduced landlord earnings by £4,000 on average this year

Unlock Tax Benefits and a Sunny Lifestyle: Introducing Malta’s Global Residency Programme

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Are you a UK property investor on the lookout for smart ways to minimize your tax burden while exploring new horizons? Imagine a life where over 300 days of sunshine, enticing tax benefits, and a remarkable lifestyle converge. Intrigued? Let us introduce you to an exclusive opportunity that could reshape your financial landscape: Malta’s Global Residency Programme (GRP).

View Full Article: Unlock Tax Benefits and a Sunny Lifestyle: Introducing Malta’s Global Residency Programme

Even upmarket landlords face ‘stark choices’ now says leading property figure

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Landlords in the capital’s prime rental sector are facing a stark choice between topping up a rent shortfall or selling up.

Luxury residential property expert, Jo Eccles, reports that highly leveraged landlords are coming under serious cost pressures as fixed rate mortgage deals come to an end. Stress testing by lenders means some are finding they can borrow 30% less than before, forcing them to make up the shortfall or sell.

The founder and MD of Eccord, which manages £1.5 billion worth of residential property in prime central London for portfolio and individual landlords, says: “Those with the financial flexibility are reorganising their finances to pay down debt and raising rents by an average of 15% at renewal, but it isn’t always enough to meet their increased borrowing and service charge costs – which are up 30% in some buildings.”

One landlord has seen his mortgage repayments more than double from £4,000 a month to £9,000 a month and can’t sell due to cladding issues.

Rent increase

“We’ve secured him a significant rent increase of 19% but he has still swung from a monthly surplus to a £2,000 shortfall, which he’s having to personally top up each month.

“This illustrates that the challenges landlords are facing can’t always be resolved with rent increases alone.”

Some now have no choice but to exit the market which will further diminish supply and cause more hardship for tenants, believes Eccord.

“For landlords who are able and committed to remaining in the market long term, we are seeing them review their existing arrangements,” she adds.

“Many are choosing to move away from underperforming letting agents or property managers with high staff turnover, as they recognise the importance of tenant experience now more than ever, if they’re to achieve high rent increases.”

Read more about rising mortgage rates.

View Full Article: Even upmarket landlords face ‘stark choices’ now says leading property figure

Essential Considerations Before Selling Your Rental Properties

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When it comes to the decision of selling your rental properties, your thought process is respected. However, before taking the leap, it’s crucial to delve into some essential aspects that might influence your choice. One such critical factor is Capital Gains Tax (CGT)

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Section 21 removal will cause chaos in courts

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A leading industry body is warning the Justice Secretary that the removal of Section 21 will cause harm to the legal system.

Propertymark has written to Alex Chalk about the level of widespread concern from landlords and letting agents about the capacity of the courts to handle possession cases.

View Full Article: Section 21 removal will cause chaos in courts