Increasing BTL mortgage costs will ‘put the market under pressure’

The recent rise in the Bank of England base rate will put the BTL market under pressure, one broker says.

Property Master says that with BTL mortgage costs set to increase further after the base rate hike, landlords need to look at the products available – and whether they should fix now before rates increase.

Angus Stewart, the chief executive of Property Master, an online broker for buy-to-let mortgages, said: “Landlords should check when their current fixed terms are expiring or see whether they wish to have certainty on their monthly repayments by looking at a new fixed rate now as base rate increases yet again.

“The Bank of England’s increase in the base rate of 0.75% from 2.25% to 3% follows similar increases in rates from the Fed Reserve in the US and the European Central Bank.

“These increases are all with the goal of curbing the rapid increase in inflation which has now topped 10% against the Bank of England’s target rate of 2%.”

‘Many fixed rates are already pricing in this level of interest rate’

He added: “Landlords should also expect any mortgage on a tracker or variable rate to reflect this rate increase, and while many fixed rates are already pricing in this level of interest rate, we are seeing continued fluctuations in lenders’ rates.

“The good news is that there is now greater stability in the financial markets and products are not being withdrawn and repriced as they were immediately after September’s disastrous mini-Budget.”

Mr Stewart said he expects the base rate to continue increasing over the next year to between 4% and 5%.

He added: “So, this is a good time for landlords to look at their current mortgage rate and see if they can lock in some certainty of monthly repayment.

“Apart from increasing interest rates, lenders are also increasing stress rates they use to assess affordability.

“This can have a significant impact on the amount landlords can borrow when they purchase or remortgage.”

Lender’s stress rates have been built into their search offering

He said that a lender’s stress rates have been built into their search offering to enable landlords to understand clearly what they can borrow.

Mr Stewart said: “Landlords are being squeezed on all fronts.

“With higher interest payments that cannot be offset against tax, a need to improve the energy efficiency of properties, tenants that are likely to struggle to pay rent and the increasing cost of building materials.

“These are already impacting the profitability of BTL, and we expect more landlords to decide it’s now time to sell up.”

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