Landlord mortgage costs rising faster than rent rises, research shows

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Landlords’ mortgage costs have been faster than rent rises over the past two years, new research has highlighted.

Estate agency Barrows and Forrester says its analysis of average landlord borrowing costs show a BTL investor with a variable rate repayment mortgage is now paying a 20% more a month than in 2021, or £1,113 compared to £942.

Figures for interest only BTL mortgages are even more severe, revealing a 44% increase from £486 to £703 a month.

Although only a guide only to rising costs for landlords which don’t reflect the differing debt levels and interest-rate deals landlords have, what they show is mortgage costs running away faster than rent rises.

Data from referencing firm Homelet reveals that rents across the UK have increased on average by £120 a month over the past two years, or an 11.7% increase, substantially lower than the mortgage costs increases.

Higher cost

“As it stands, the nation’s landlords are yet to hand down the far higher cost of borrowing to their tenants and while rents have climbed of late, they haven’t increased at the same rate as the monthly cost of a mortgage,” says James Forrester, the agency’s MD (pictured).

“This is partly due to the fact that many landlords will have secured a favourable rate on a fixed product before interest rates started to climb. But those that managed to do so are likely to be approaching the end of their fixed term this year and will be hit with far higher rates when they do.

“Unfortunately for the nation’s tenants, [landlords] are left with little choice but to recoup this higher cost via an increase in rents and so we expect to see sharp upward growth in the average cost of renting as the year progresses.”

The data is based on a BTL mortgage for a property costing the UK’s average house price of £289,818.

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