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Buy-to-let mortgage costs outpacing rents

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New analysis reveals that landlords are seeing their mortgage payments rise at a faster rate than rents, signalling that some investors aren’t passing on all their rising costs to tenants.  When compared how rents have increased over the past year versus the average cost of buy-to-let mortgage payments, based on the average price for a new tenancy and the cost of a buy-t0-let mortgage with a 40% deposit. Across Great Britain as a whole mortgage rates have risen by 13.0% year-on-year, outstripping rental price growth of 9.9%. This is closing the gap between mortgage and rental payments, as mortgage costs now average at £982 per month, compared to £1,1068 for rents.

Mortgages have risen at more than double the rate of rents, signalling that landlords are feeling the pinch the most in those regions. Mortgage payments have surged by 15.2% year-on-year to £712. Over the same period, rents have risen by 7.4% to £826 - so the gap is closing between the two. London doesn’t tally with the general trend, as rents have increased by 12.9% year-on-year, exceeding an 11.4% increase in mortgage payments. As a result, the capital’s tenants have to fork out £2,109 per month for a new tenancy, which far exceeds the average mortgage repayment costs of £1,789.

In Scotland, the government’s policy of controlling rents on existing tenancies appears to be having the opposite effect on new tenancies, which are 15.8% more expensive annually at £973 per month, a bigger percentage increase than any other region in Great Britain. This compares to mortgage costs of just £643 per month north of the border, after rising by 12.4% year-on-year.

While it’s true to say that mortgage costs are rising at a faster rate than rental payments, it’s important to note that rising mortgage costs are coming from a lower base than rents.

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Posted by MMB Finance Swindon and Gloucester on 12 October 2023