Huge scale of rental sector reliance on mortgages rev...

The buy to let sector appears more heavily reliant on mortgages than some analysts have previously suggested.

Specialist lending service Octane Capital has analysed the typical size of landlord portfolios, as well as number of buy to let mortgages held across England and Wales.

The results found that across England and Wales a significant 78 per cent of the average buy to let portfolio is financed by borrowing.

Landlords are particularly reliant on mortgages in the East Midlands, where 97 per cent of properties are held with a loan.

This is followed by the West Midlands and Wales, where 89 and 83 per cent of investment properties are currently financed with a mortgage.

This far higher percentage of leverage suggests that these areas of the buy to let market present the greatest degree of vulnerability to landlords, who may struggle to make the economics of their investment work during a sustained period of higher interest rates.

As a result, they could see a higher number of landlords opting to exit the sector and putting their portfolio properties up or sale.

Yorkshire and the Humber is the area with the lowest proportion of properties held with a loan, at just 67 per cent, meaning investors are less affected by rising rates in the region.

A relatively low ratio of properties are also mortgaged in the South West and the North West, at 67 and 70 w respectively.

Octane Capital chief executive Jonathan Samuels says: “The rising cost of mortgages has been a challenging storm for landlords to weather, and considering their reliance on mortgage finance it’s easy to see why.

“In much of the country the overwhelming majority of investment properties are held with a loan, meaning those landlords will have no choice but to raise rents to compensate for rising interest rates.

“This is particularly the case in the East and West Midlands, where many will be feeling the pinch when they remortgage going forward.

“Investors in Yorkshire and the Humber are least affected, with a third of investment properties being owned outright, so some landlords should be shielded from the tougher market conditions.”

John McKay
02 October 2023 13:18 PM

I think there's more value in the figures than you suggest AL. Shelter, among others, always like to say that the number of BTL properties that are unencumbered is much higher than this report indicates.

John McKay
02 October 2023 14:54 PM

I wasn't suggesting that they did. The figures are useful for highlighting exactly that point, that Shelter cannot be trusted (and It's McKay :) )

Annoyed Landlord
02 October 2023 14:57 PM

' John McKay - apologies for that type.

Those of us in the business know Shelter/GR etc cannot be trusted, but their supporters would believe them regardless of facts, figures etc.