Buy-to-let investors paying £100 a month more for mortgages as rates rise and profits are squeezed

LANDLORDS are paying £100 more a month for mortgages, which will squeeze profits amid “relentless” interest rate increases, rising house prices and stricter tax rules.

A buy-to-let investor taking out a typical £160,000 mortgage with a 40pc deposit would have paid £262 a month in January, based on the average twoyear fixed-rate of 1.69pc. This has increased to £365 a month with average rates having risen to 2.46pc, according to Property Master, a broker.

Chief executive Angus Stewart said rates were rising and deals were being withdrawn “more or less on a daily basis”.

He added: “Rates may look low from a historical point of view, but the increases we are seeing come at a very bad time. Increased taxes and regulation have already chipped away at profits. Now increased borrowing costs are making margins slimmer still.”

Meanwhile, landlords also face having to pay for costly mandatory energy efficiency improvements in the coming years, although these could be capped at £10,000 per property.

Lenders have also increased stresstesting on buy-to-let mortgages over worries tenants will struggle to pay rents because of the cost-of-living crisis. This has reduced how much landlords can borrow and has meant there are now fewer options for investors, pushing up prices.

Mr Stewart said the accumulation of these rising costs would force landlords to pass them on to tenants and charge higher rents, only exacerbating the problem.

Owner occupiers have also been stung by higher remortgage costs, with the average two-year and five-year fixed rates having more than doubled since October.

The average two-year mortgage from the top 10 lenders is now 2.36pc, compared with just 0.89pc in October. The average five-year deal has risen from 1.05pc to 2.46pc, according to broker L&C Mortgages.

This followed the fourth consecutive rate increase by the Bank of England last week, from 0.75pc to 1pc. Interest rates are now the highest they have been for 13 years.

David Hollingworth, of L&C Mortgages, said the mortgage market was moving at “breakneck speed” as lenders scrambled to manage their pricing.

He added: “This often results in deals lasting days rather than weeks and presents a real challenge for borrowers trying to keep on top of things.”