Skip to content

Landlords Bracing Sizeable Rise | A Buy-to-let Nightmare

Landlords Bracing Sizeable Rise

Rising Mortgage Rates for Buy-to-Let Landlords

In 2024, about 150,000 buy-to-let landlords are poised to see their mortgage payments jump as their fixed deals end. Data shows that 144,000 landlords will end their five-year agreements, facing higher rates when they remortgage.

Current vs. Future Mortgage Rates

Back in 2019, landlords enjoyed an average rate of 3.5%. Now, projections by Capital Economics indicate they might face rates between 4.5% and 5%. For a landlord with a £150,000 interest-only mortgage, this could mean nearly £200 more monthly, adding up to an extra £2,250 a year.

Challenges in Refinancing

Darryl Dhoffer from The Mortgage Expert points out that landlords coming off lower rates will significantly increase their repayments. He warns that some could see a rate increase of three percentage points, boosting monthly payments by £450 on a £150,000 loan.

Impact of Tax Changes

The reduction in tax relief on mortgage interest between 2017 and 2020 adds another layer of complexity. Now, landlords can’t deduct all their mortgage interest as a business expense, which hits particularly hard if their properties are loss-making.

Anticipated Rent Increases

Michelle Lawson from Lawson Financial predicts landlords ending their five-year deals will likely raise rents to cope with higher costs. She attributes this need to the squeeze on profit margins from increased taxes and regulations.

Wider Mortgage Trends

UK Finance data shows that over 210,000 buy-to-let mortgage holders are due to finish their fixed-rate deals in 2024. Another 35,000 landlords who remortgage on two-year deals in 2022 will face unexpected rate hikes.

Economists warn that landlords ending two-year deals will face higher rates even as the overall market might drop. For example, someone who secured a 2.59% rate in 2020 could see rates rise to an average of 4.6% by mid-2024. This means a landlord with a £150,000 loan could pay £575 monthly, up £127 from two years ago and £252 more than in 2020.

Future Outlook

Despite these challenges, Capital Economics forecasts that rates might fall below 4.5% by the end of 2024, offering some relief. This scenario is brighter than those who refinanced after the economic upheaval following Liz Truss’ mini-budget in late 2022.

This concludes our article “Landlords Bracing Sizeable Rise.” Stay “Connect” until next time.

Why Join Connect Network