A recent report by real estate firm Hamptons, has found that almost 225,000 property owners could lose money on their rental properties when they come to renew their buy-to-let mortgages. Mortgage rates are approaching 6% and 7% for buy-to-lets in personal names and limited companies respectively.
The report found that 226,930 rental properties (11% of all mortgaged rental properties) will not generate sufficient income to cover costs at the current mortgage interest rates.
Approximately 70% of buy-to-let landlords own a property that is mortgaged and therefore this sector is more at risk from higher interest rates.
Increasing mortgage rates, together with tax increases such as the withdrawal of higher-rate tax relief on mortgage interest (s24) and the surcharge stamp duty on additional residential homes, mean that landlords rental yield are being squeezed and not all costs can be passed on to the tenants.
Buy-to-let landlords are encouraged to review the rental yield when re-mortgaging or purchasing a new buy-to-let to ascertain whether it is an affordable investment.
For further information on buy to let, please contact us on 023 8046 1254 or email Tom Young.