Rising Mortgage Repayments Close Gap on Rents

According to a new study, the gap is closing between buy-to-let mortgage repayments and rents.

Successive interest rate rises have eroded rental profits for many landlords, property experts claim.

Average mortgage repayments for landlords have reached £982 a month, while new tenancies average £1,068 a month, says specialist lender Octane Capital.

The study claims mortgage rates for landlords have increased faster than rents and that many landlords are swallowing the extra costs rather than passing them on to tenants.

The lender says mortgage rates have surged by 13 per cent while rents have increased by 9.9 per cent. The figures are based on a 60 per cent loan-to-value buy-to-let loan and the average cost of a new tenancy.

Dilemma for landlords

A deeper look at the study shows landlords in Yorkshire, The Humber, and the Northeast share the worst financial dilemma as mortgage costs have soared at twice the rate of rent increases.

Loan payments in Yorkshire and The Humber are up 15.2 per cent yearly to £712 a month, while rents rose 7.4 per cent to £826.

London landlords are better off. Mortgage repayments increased by £1,789 or 11.4 per cent, while rents were up £2,109 or 12.9 per cent.

Octane Capital CEO Jonathan Samuels said: “While landlords are often blamed for ramping up rents, in many cases, buy-to-let mortgage costs are rising faster than the cost of new tenancies.

“This year has undoubtedly been tough for landlords and renters – as neither has been able to escape rising costs.”

The pressure may lift for landlords as mortgage costs come down.

Massive choice of mortgage deals

Research by mortgage monitor Moneyfacts indicates interest rates are falling.

Buy-to-let mortgage best buys from Moneyfacts.

The average two-year fixed rate buy-to-let mortgage across all loan-to-values dropped from 6.64 per cent to 6.4 per cent.

Moneyfacts also pointed out that landlords remortgaging can choose from expanding deals. In October last year, the buy-to-let mortgage count was 988. A year later, the count climbed to 2,581.

The cheapest deals are five-year fixed rates. Borrowers looking for a 60 per cent loan-to-value investment mortgage can expect an interest rate of 5.7 per cent, down from 5.95 per cent in September.

Landlords who need an 80 per cent loan-to-value deal are paying more.

The average interest rate for a 60 per cent loan-to-value two-year fix is 6.9 per cent, but borrowers taking a loan at 80 per cent loan-to-value are paying an average of 6.95 per cent for the same two-year fix.

Unaffordable payments

According to credit ratings agency DBRS Morningstar, landlords remortgaging at the current rates pay 52 per cent more each month.

The firm says the current rates are a risk to landlords who have bought properties since 2018, and if rates continue to rise, many borrowers will face unaffordable payments.

Landlords expect to remortgage one in six of 4.2 million buy-to-let homes from a two-year fix at old rates to a new deal at current rates over the next 18 months.

However, an interest-only repayment calculation on the average UK property price of £278,601 shows that rents and mortgage costs are already level-pegging:

Average UK home price



Mortgage costs @ 60% LTV


£167,160 x 6.9% = £961 a month

Mortgage costs @ 80% LTV


£222,880 x 6.95% = £1,290 a month

UK average rent


£1,276 a month

Buy-to-let profits will improve if interest rates go down or property prices increase.

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