Hamptons: Mortgage rate hikes have halved landlords’ profits

Landlords have seen their annual profits halve since the start of the year due to higher mortgage rates, according to analysis from Hamptons estate agent.

What is more, according to the company if the base rate was to reach 2.5% the average UK landlord could see their profits turn negative.

Two-year fixed rate buy-to-let mortgages at 60% loan-to-value have typically risen from 1.25% to 3.12% since October last year, analysis of rates at the top 10 lenders by mortgage broker L&C Mortgages has found.

For landlords with a mortgage to 75% LTV average rates have risen from 1.49% to 3.21% since October.

Nathan Emerson, chief executive of estate agent body Propertymark said: “Over the past six months, we’ve seen significant shifts in trends that professionals in the sector had been accustomed to.

“’Mortgages including buy-to-let, which are on short term, fixed contracts, have been at historically low interest rate levels for years but are now rising sharply.

“Property owners seeing increases to their monthly repayments are having to raise rents.

“This is leaving many renters in difficulty due to affordability at a time where other costs are also rising.”

The abolition of mortgage income tax relief, which was replaced by a tax credit amounting to 20% of mortgage payments, will worsen the situation for investors.

Higher mortgage costs starting to bite

Simon Jones, chief executive at financial comparison site Investing Reviews, added: “Buy-to-let landlords are facing a double whammy of rising borrowing costs and increased taxes.

“Typically buy-to-let investors will have taken out 75 per cent loan-to-value interest-only mortgages at around 2%, but those coming to the end of their deal are now facing rates of 4%.

“Thanks to George Osborne, mortgage interest relief is no longer available to landlords who bought investment properties in their own personal name.

“Those landlords who are higher rate taxpayers are quickly seeing their cash-flow vanish.”

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