Buy To Let mortgage costs rising with worse to come - warning

The costs of buy to let fixed rate mortgages have risen sharply with more increases likely if, as expected, the Bank of England raises base rate for the fifth month in a row next week.

Online buy to let mortgage broker Property Master says the average rate for a typical two-year fixed rate mortgage for £160,000 with a Loan to Value of 60 per cent has increased a full percentage point to 2.69 per cent from 1.69 per cent this year.  

This represents an increase in the monthly repayment cost since the start of the year of £133 per month for a typical mortgage of £160,000.

Property Master chief executive Angus Stewart says: “Lenders are now well into the swing of putting through rate increases quickly. There was a particular flurry of rises ahead of the long Jubilee weekend. I think we will see this rising interest rate environment continue at least well into next year.  

“At the last Bank of England Monetary Policy Committee meeting all members voted for an increase in base rate - the only question was by how much.  Landlords should be bracing themselves to see a further rate rise next week.”

The cheapest typical buy to let product is for a two-year fixed rate mortgage - for £160,000 with a Loan To Value of 60 per cent - moved up from 2.46 to 2.69 per cent recently, an increase in monthly cost from £365 to £395 or £30 per month more, once fees are included.  

The increase was slightly less for the more popular five-year fixed rate mortgages.  A typical five-year fixed rate buy-to-let mortgage with an LTV of 60 per cent again for £160,000 increased from 2.58 to 2.80 per cent, an increase in monthly cost from £359 to £388 or £29 per month more once fees are included.

Stewart concludes: “At the end of the day higher buy to let mortgage repayments will have to be passed on to tenants. Recent research suggests more than half of landlords say they will need to increase rents over the next year.  Remortgaging to a better deal can be an option for landlords but they will need to move quickly before the next round of rate rises hits the market.”