Landlords Bear the Brunt as Mortgage Inflation Exceeds Rent Hikes

Recent findings have shown that landlords are facing mortgage payment surges which are rising more swiftly than their rental income. According to specialist research from Octane Capital, this indicates that numerous investors are opting not to transfer all their escalating expenses to their tenants.

Analysing the rise in rents over the past 12 months versus the average outlay of buy-to-let mortgage repayments, the study used the median price of new tenancies and the expenses linked with a buy-to-let mortgage involving a 40% deposit. From this data, it was discovered that mortgage rates across Great Britain experienced a 13.0% surge year-on-year. This uptick surpasses the 9.9% growth in rental prices.

The upshot is a narrowing divide between monthly mortgage and rental fees, with mortgage costs now averaging £982 and rents at £1,068.

Yorkshire and the Humber, alongside the North East, have experienced mortgages inflating more than twice as fast as rents, indicating that these areas have the most financially strained landlords. Specifically, in Yorkshire, mortgage payments have soared by 15.2% year-on-year, reaching £712, while rents have seen an increment of 7.4%, totalling £826 monthly.

A similar trend is seen in the North East, where mortgage rates have climbed by 15.4% to an average of £547 monthly. In contrast, rental prices have risen by 7.6%, setting the monthly rate at £636.

Contrastingly, London’s pattern diverges from the national average. In the capital, rental rates escalated by 12.9% year-on-year, outpacing the 11.4% rise in mortgage costs. Consequently, new tenants in London now face a steeper monthly rent of £2,109, which significantly overshadows the average mortgage repayment fee of £1,789.

Scotland’s scenario presents a different challenge. Here, the government’s strategy to control existing tenancy rents seems to have backfired for new tenancies. These have become 15.8% more costly year-on-year, reaching a monthly charge of £973. This growth rate is the most pronounced of any region in Great Britain. In comparison, mortgage expenses in Scotland sit at a mere £643 monthly, after a year-on-year increment of 12.4%.

However, a critical observation is that, despite the faster pace of mortgage cost hikes, they are stemming from a lower starting point than rents.

Adding his insights, Jonathan Samuels, the CEO of Octane Capital, stated: “While landlords are often blamed for ramping up rents, in many cases buy-to-let mortgage costs are rising faster than the cost of new tenancies. This year has undoubtedly been a tough one for landlords and renters – as neither has been able to escape rising costs.”