As the Bank of England’s base rate continues to ride high at 5.25% it has been revealed that a much higher proportion of landlords own properties via mortgages than was previously thought.
Research by Octane Capital reveals that on average across the UK some 78% of landlords portfolios feature mortgage debt and that in one region – the East Midlands – it’s 97%.
This is followed by the West Midlands and Wales, where 89% and 83% of investment properties are currently financed with a mortgage.
Landlords with mortgages have seen the BoE base rate rise over a dozen times over the two years, and those who signed up to variable or tracker mortgages have been hit hardest, although rates have been simmering down in recent weeks.
For example, Paragon this week launched a 4.69% five-year fixed buy-to-let mortgage deal, its lowest rate for 12 months.
But Octane says that such high levels of debt among landlords mean some will continue to “struggle to make the economics of their investment work during a sustained period of higher interest rates,” says Jonathan Samuels, CEO of Octane Capital (pictured).
“As a result, they could see a higher number of landlords opting to exit the sector and putting their portfolio properties up or sale,” it says.
“The rising cost of mortgages has been a challenging storm for landlords to weather and considering their reliance on mortgage finance it’s easy to see why.
“In much of the country the overwhelming majority of investment properties are held with a loan, meaning those landlords will have no choice but to raise rents to compensate for rising interest rates.”