Buy-to-Let Landlords Brace for Impact as Fixed-Rate Mortgage Deals Expire

Buy-to-let landlords are feeling the squeeze as interest rates rise and costs increase. With over 2 million properties at stake, the fall in mortgage rates is a ray of hope for financial relief.

Buy-to-let landlords are facing a tough time as they grapple with higher interest rates, increased costs, and a less favorable tax regime. The current fall in mortgage rates is being closely watched by landlords, who are hoping for some relief in their financial burden. According to UK Finance data, there are over 2 million buy-to-let properties with mortgages, and approximately 230,000 of these have fixed-rate mortgage deals expiring this year. While residential rates have been in the spotlight, buy-to-let rates have also seen a downward trend.

Landlords with mortgages are feeling the pinch as their profits are being eroded by higher mortgage rates. Many of them had become accustomed to the ultra-cheap finance available in recent years, but the average two-year fixed rate buy-to-let mortgage is now at 5.47 per cent, while the average five-year buy-to-let mortgage is 5.48 per cent. This means that landlords with a £200,000 interest-only mortgage on a two-year fix will need to pay £912 a month in mortgage costs. When combined with other expenses such as periods of property vacancy, repairs, maintenance, letting agent fees, compliance checks, insurance, and service charges, it becomes clear that many landlords are heavily reliant on rising rents to turn a profit.

Those who are now remortgaging had previously enjoyed rock bottom rates, with average two-year fixed rates at 2.38 per cent. This means that their monthly mortgage costs have more than doubled, from around £397 to the current £912. However, there is a silver lining as mortgage rates have been gradually falling since last summer, offering some respite to landlords.

Buy-to-let landlords are facing significant financial challenges due to higher interest rates and increased costs. The recent fall in mortgage rates provides some hope, but landlords will need to carefully consider their options and seek out the best deals available to mitigate their financial strain.