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Bad news for landlords as mortgage rates rise

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Bad news for landlords as mortgage rates rise

Landlords have dealt with their fair share of changes in recent years, from the Stamp Duty surcharge to new tougher mortgage regulations.

But the latest rules have had an unwelcome impact on mortgage rates, according to Moneyfacts, seeing the rates on buy-to-let deals increase.

It noted that since 1st October the average two-year fixed rate has increased by 0.05% and is on target to get back to the rate seen in September, before the latest set of regulatory changes came into effect.

It’s a small jump from 2.79% to 2.84% but it mirrors the rising rates seen across the mortgage market, as rumours of a Base Rate hike intensify.

Charlotte Nelson, finance expert at Moneyfacts, said: “It has been a turbulent time for the buy-to-let market thanks to multiple rule changes and there’s no sign of calmer waters as rates are starting to creep up from their record lows.

“While a 0.05% increase appears insignificant, it marks a turnaround in the buy-to-let sector, so landlords are now faced with not only more hoops to jump through but higher rates as well.

“So far 18 individual providers have upped their rates since the start of September.”

Portfolio landlord rules

The beginning of this month marked another significant change in the buy-to-let mortgage market, said Moneyfacts, as lenders are now required to apply stricter underwriting criteria to portfolio landlords.

This has seen the buy-to-let mortgage market shift away from landlords who have three or fewer properties, with a 13% drop in the number of products available to this group since the start of October.

Nelson added: “This portfolio change may have had a more practical effect on rates as well, with lenders not just being a little more cautious; some lenders may have had to change their process behind the scenes to accommodate the new rules, and this extra cost may be impacting these providers’ pricing activity.

“With all the changes and now the rising buy-to-let rates, it is going to be more difficult for individual landlords to make a profit that is worth their efforts. Landlords will have to weigh up the costs to figure out what their best possible option may now be.”

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