Buy-to-let mortgage rates have outstripped rents despite a rental price growth of 9.9% across the UK, study finds.
The research from lender Octane Capital, found that the gap between mortgage and rental payments is closing as mortgage costs now average £982 per month compared to £1,1068 for rents.
It said landlords have seen their mortgage payments rise at a faster rate than rents in the past year, signalling that some investors aren’t passing on all their rising costs to tenants.
Across the UK as a whole mortgage rates have risen by 13.0% year-on-year, outstripping rental price growth of 9.9%.
Octane Capital compared how rents have increased over the past year versus the average cost of buy-to-let mortgage payments.
It is based on the average price for a new tenancy and the cost of a buy-to-let mortgage with a 40% deposit.
Mortgage rates across the UK
Octane Capital said in Yorkshire and the Humber and the North East mortgages have risen at more than double the rate of rents.
It added that landlords in those regions are feeling the pinch the most.
In Yorkshire mortgage payments have surged by 15.2% year-on-year to £712. Over the same period rents have risen by 7.4% to £826 – so the gap is closing between the two.
And in the North East mortgage rates have increased by 15.4% to average at £547 per month. This compares to a rental price increase of 7.6%, bringing it to £636 per month.
It said London doesn’t tally with the general trend, as rents have increased by 12.9% year-on-year, exceeding a 11.4% increase in mortgage payments.
The capital’s tenants have to fork out £2,109 per month for a new tenancy which far exceeds average mortgage repayment costs of £1,789.
While in Scotland the government’s policy of controlling rents on existing tenancies appears to be having the opposite effect for new tenancies.
The costs are 15.8% more expensive annually at £973 per month, a bigger percentage increase than any other region in the UK.
This compares to mortgage costs of just £643 per month north of the border, after rising by 12.4% year-on-year.
The study notes that while mortgage costs are rising at a faster rate than rental payments, it’s coming from a lower base than rents.
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 is particularly the case in Yorkshire and the Humber and the East Midlands, where the markets clearly don’t allow landlords to recover all their higher outgoings in the form of rents.
“This year has undoubtedly been a tough one for landlords and renters – as neither has been able to escape rising costs.”
