Since 2021, BTL mortgage rates have surged from an average of just 1.65% in October 2021 to 5.72% in October 2023
Monthly interest costs have surged by 283% since 2021 for landlords using interest-only mortgages, while those making a full monthly repayment have seen the monthly cost of their mortgage jump by 71%.
This is according to new research from Octane Capital which compared the latest rates available (October 2023) for a 75% LTV two-year fixed rate BTL mortgage and how these rates have changed on an annual basis over the last decade.
The research reveals that the average BTL mortgage rate available had been in steady decline because of the base rate remaining at historic lows since 2009. In fact, it dropped from 5.06% in October 2012 to a low of 1.65% in October 2021, just before interest rates started to jump in December 2021.
As a result, the average monthly mortgage payments on a BTL mortgage was significantly lower than they are today. Landlords making a full monthly repayment were paying an average of £804 per month, while those making interest only payments were paying only £272 per month.
Since 2021, BTL mortgage rates have surged from an average of just 1.65% in October 2021 to 5.72% in October 2023. Meantime, property prices have increased between the two periods, from £363,333 in 2021 to £291,385 in 2023, making things even pricier for new investors.
As a result, the average landlord is now paying £1,371 per month when making a full monthly repayment, a rise of 71% versus October 2021. Nevertheless, those choosing to make interest only payments on their mortgage have seen a much sharper rise in costs, jumping to £1,042 per month – a rise of 284%.
One silver lining for mortgage holders is the cost of two-year fixed rates have started dropping again, as they dropped slightly from 5.87% to 5.72% between October 2022 and October 2023.
Octane Capital chief executive Jonathan Samuels says: It has been a challenging year for the nation’s landlords, as mortgage repayments have dramatically eaten into their profit margins, margins that have already been reduced because of a string of legislative changes from the government in recent years.
Samuels says: Those who opt to pay an interest only payment have seen a especially big rise in the monthly cost of their mortgage and so it is no wonder many landlords are dubious about their future in the sector and the profitability of their portfolio.