Landlord mortgage costs experience “relentless climb”

The cost of buy-to-let mortgages have surged this year, even prior to the Bank of England’s latest base rate rise last week.

Mortgage costs have risen by over £100 so far this year on a £160,000 buy-to-let mortgage, according to figures from buy-to-let broker Property Master.

Its chief executive Angus Stewart describes this as a “relentless climb”.

He said: “This increase was before the Bank of England increased the base rate for the fourth time in a row.

“The current turbulence in the money markets is also making it more difficult for some lenders to raise funds, so there is a fear that as well as higher mortgage costs landlords may also face reduced choice.

“We are recommending to our clients that if they need to remortgage or are planning a new purchase, they should bear in mind mortgage rates are changing and products are being withdrawn on a more or less daily basis.”

Mortgage costs are still low looking at historic levels, but Stewart pointed out that the tax regime isn’t as friendly anymore now mortgage income tax relief has been eliminated.

Analysing 30 lenders, Property Market found the cheapest 2-year fix to 60% LTV has moved from 2.36% to 2.46% since January.

Meanwhile the lowest 5-year fixed rate has moved from 2.48% to 2.58% over the period.

House hunter rush

Estate agency Chestertons suggests house hunters are feeling a new sense of urgency now interest rates are rising.

In April, cumulative data from the agency’s 32 branches registered a 39% uplift in sales enquiries vs April of last year. A driving force behind this market boost, Chestertons said, was the Bank of England’s anticipated announcement to raise interest rates on 5 May.

With the Bank of England stating that inflation is likely to rise to around 10%, further interest rate rises are expected. As a result, the agency said buyer registrations will continue to grow, creating an even more competitive housing market. The volume of new buyers who have registered this year are already at a record ever level.

Cory Askew, head of sales, says: “This month’s rate rise has had the same immediate effect of the last two rate rises: a surge of new buyers eager to close a deal before rates rise again. Our sales enquiries are up year on year but those buyers are chasing 15% fewer property on the market. An imbalance that is pushing prices up in most locations.”

Guy Gittins, chief executive of Chestertons, said: “The past months, homeowners wanting to sell have been in a very strong position and, with interest rates on the up, this seller’s market is only intensifying. Towards the end of April, new sales enquiries were higher than at any point last year; even with the added incentive of stamp duty savings. As we expect demand to outstrip supply for at least the next six months, we have seen a 35% drop in the number of sellers willing to reduce their asking prices in April vs April 2021.”

Chestertons warned that, in addition to a more competitive market, house hunters need to be prepared for their property transaction to take longer than expected.

Gittins added: “Although the market is no longer seeing last year’s level of delays, solicitors and valuation surveyors are still facing an immense backlog of sales which can result in a prolonged wait for a deal to be finalise.”

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