A top financial executive claims that the recent drop in buy-to-let mortgage rates has provided a much-needed boost to the UK’s landlords, following a turbulent period of rising interest costs.
Jonathan Samuels, the CEO of Octane Capital, has highlighted how falling rates have helped stabilize the rental market, offering landlords some relief after grappling with sharply increased mortgage payments over the past two years.
Surging Costs Hit Landlords Hard
According to Samuels, the hike in interest rates starting in December 2021 had a significant impact on landlords. Back then, the average buy-to-let mortgage rate was just 1.7%, requiring an interest-only repayment of £286 per month. This shot up dramatically as the Bank of England implemented 14 consecutive rate hikes, pushing the base rate to 5.25% by September 2023. At that point, the average buy-to-let mortgage rate surged to 5.99%, causing monthly full repayments to skyrocket to £1,382—an increase of 67%. For landlords making interest-only payments, the cost surged even more dramatically by 274%, reaching £1,071 per month.
Rate Cuts Offer Welcome Relief
However, a rate freeze in late 2023 and the first interest rate cut in four years, introduced in August 2024, have reversed some of these trends. The average buy-to-let mortgage rate has since fallen to 4.33%, reducing full monthly repayments by 12% to £1,212, while interest-only payments have dropped by 25% to £801. Samuels pointed out that this shift has offered landlords much-needed breathing room and increased borrowing affordability.
Expansion of Landlord Portfolios
The reduction in mortgage rates has not only eased financial pressures but has also fueled growth in landlord portfolios. The average buy-to-let investor now owns 7.6 properties, up from 7.2 earlier in the year. Notably, regions like the East Midlands saw significant expansion, with landlords adding an average of 2.5 properties to their portfolios between the first and second quarters of 2024. Other regions also saw notable growth, including Wales (+1.9 properties), the North West (+1.0), and the East and South East of England (both +0.5).
As mortgage rates continue to stabilize, Samuels predicts a sustained period of recovery for the buy-to-let sector, offering hope to landlords after a challenging few years.
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